Filed Pursuant to General Instruction II.L of Form F-10
File No. 333-251330
PROSPECTUS SUPPLEMENT
To Short Form Base
Shelf Prospectus dated August 12, 2020
as Amended December 14,
2020
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New Issue
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February 4, 2021
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NEOVASC INC.
6,230,803 Common Shares
This prospectus supplement
of Neovasc Inc. (“Neovasc”, the “Company” or “We”) relates to the issuance,
from time to time, during the period that the accompanying base shelf prospectus, including any amendments thereto, remains valid,
of up to 6,230,803 common shares in the capital of the Company (the ‘‘Common Shares”) issuable upon exercise
of 6,230,803 Common Share purchase warrants (the “December Warrants”) issued by the Company pursuant to
the December Offering (as defined below) (the “Offering”). See “Plan of Distribution”.
The Company filed a
prospectus supplement dated December 8, 2020, to its short form base shelf prospectus dated August 12, 2020, as
amended December 14, 2020, with the securities commission or similar regulatory authority in the provinces of British
Columbia, Alberta, Saskatchewan, Manitoba and Ontario relating to the offering in the United States of 6,230,803 units
(the “December Units”) of the Company at a price of US$0.9801 per Unit (the
“December Offering”). The December Offering closed on December 10, 2020.
Each December Unit
was comprised of (i) one Common Share and (ii) one December Warrant. Each whole December Warrant entitles the
holder to purchase one Common Share at an exercise price of US$0.856 per Common Share for a period of five and one-half years following
issuance.
This prospectus supplement
registers the issuance of the Common Shares upon exercise of the December Warrants under the United States Securities Act
of 1933, as amended (the “US Securities Act”), in accordance with the multi-jurisdictional disclosure system
adopted by the United States Securities and Exchange Commission (the ‘‘SEC”) and the securities commission
or similar regulatory authority in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. This prospectus
supplement does not qualify in any of the provinces or territories of Canada the distribution of the securities to which it relates.
The Common Shares are listed
on the Nasdaq Capital Market (the “Nasdaq”) and on the Toronto Stock Exchange (the “TSX”)
under the symbol “NVCN”. On February 3, 2021, the trading day before filing of this prospectus supplement, the
closing price of the Common Shares was US$1.32 on the Nasdaq and C$1.68 on the TSX.
Investing in our securities
involves a high degree of risk. You should carefully read the “Risk Factors” section in the accompanying base
shelf prospectus, as well as the information under the heading “Cautionary Note Regarding Forward-Looking Statements”
and consider such notes and information in connection with an investment in any securities.
This prospectus supplement
has not been filed in respect of, and will not qualify, any distribution of the Common Shares in British Columbia or in any other
province or territory of Canada at any time.
We are permitted under
a multijurisdictional disclosure system adopted by the securities regulatory authorities in Canada and the United States to prepare
this prospectus supplement and the accompanying base shelf prospectus in accordance with the disclosure requirements of Canada.
Prospective investors in the United States should be aware that such requirements are different from those of the United States.
The financial statements incorporated by reference in this prospectus supplement and the accompanying base shelf prospectus have
been prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards
Board, and are subject to Canadian auditing and auditor independence standards. As a result, our financial statements may not be
comparable to financial statements of United States companies.
Owning our securities
may subject you to tax consequences both in Canada and the United States, including the Canadian federal income tax consequences
applicable to a foreign controlled corporation that acquires Common Shares. This prospectus supplement and the accompanying base
shelf prospectus may not describe these tax consequences fully. You should read the tax discussion in this prospectus supplement
together with the accompanying base shelf prospectus and consult your own tax advisor with respect to your own particular circumstances.
See “Certain U.S. Federal Income Tax Considerations” and “Certain Canadian Federal Income Tax Considerations”.
Your ability to enforce
civil liabilities under the United States federal securities laws may be affected adversely because we are incorporated in Canada,
some of our officers and directors and the experts named in this prospectus supplement and the accompanying base shelf prospectus
are Canadian residents, and a substantial portion of our assets and the assets of those officers, directors and experts are located
outside of the United States.
Neither the SEC, nor
any state securities regulator has approved or disapproved the securities offered hereby or determined if this prospectus supplement
or the accompanying base shelf prospectus is truthful or complete. Any representation to the contrary is a criminal offence.
No underwriter has been
involved in the preparation of this prospectus supplement or performed any review of the contents of this prospectus supplement.
Certain of the Company’s
directors reside outside of Canada and have appointed an agent for service of process in Canada. See ‘‘Agent for Service
of Process’’.
Investing in Neovasc’s
securities is speculative and involves a high degree of risk. You should carefully read the “Risk Factors” in
this prospectus supplement, the base shelf prospectus and in the documents incorporated by reference herein and therein, as well
as the information under the heading “Forward-Looking and Other Statements”. Potential investors are advised
to consult their own legal counsel and other professional advisors in order to assess income tax, legal and other aspects of an
investment in Neovasc, including the Canadian federal income tax consequences applicable to a foreign controlled Canadian corporation
that acquires Common Shares. Neovasc is a specialty pharmaceutical company primarily focused on developing and commercializing
high quality and differentiated products. Due to the nature of the Company’s business, an investment in any securities of
the Company is speculative and involves a high degree of risk that should be considered by potential investors. An investment in
securities of the Company should only be undertaken by those persons who can afford the total loss of their investment.
Our head office is located
at Suite 5138 — 13562 Maycrest Way, Richmond, British Columbia, V6V 2J7, Canada, and our registered office is located
at Suite 2600 — 595 Burrard Street, Vancouver, British Columbia, V7X 1L3, Canada.
Investors should rely only
on current information contained in or incorporated by reference into this prospectus supplement and the accompanying base shelf
prospectus as such information is accurate only as of the date of the applicable document. We have not authorized anyone to provide
investors with different information. Information contained on our website shall not be deemed to be a part of this prospectus
supplement or the accompanying base shelf prospectus or incorporated by reference herein and therein and should not be relied upon
by prospective investors for the purpose of determining whether to invest in the securities. We will not make an offer of these
securities in any jurisdiction where the offer or sale is not permitted. Investors should not assume that the information contained
or incorporated by reference in this prospectus supplement and the accompanying base shelf prospectus is accurate as of any date
other than the date on the face page of this prospectus supplement, the accompanying base shelf prospectus or the date of
any documents incorporated by reference herein or therein, as applicable.
Investors should assume
that the information appearing in this prospectus supplement, the base shelf prospectus and the documents incorporated by reference
herein and therein is accurate only as of the respective dates of the documents in which such information appears, regardless of
the time of delivery of this prospectus supplement or of any sale of the Common Shares.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two
parts. The first part is the prospectus supplement, which describes the terms of the Offering and adds to and updates information
contained in the accompanying base shelf prospectus and the documents incorporated by reference therein. The second part is the
accompanying base shelf prospectus, which gives more general information, some of which may not apply to the Common Shares. This
prospectus supplement is deemed to be incorporated by reference into the accompanying base shelf prospectus solely for the purpose
of the Offering. If information in this prospectus supplement is inconsistent with the accompanying base shelf prospectus or the
information incorporated by reference, you should rely on this prospectus supplement. You should read both this prospectus supplement
and the accompanying base shelf prospectus, together with the additional information about us to which we refer you in the section
of this prospectus supplement entitled “Where You Can Find More Information.”
You should rely only
on the information contained in or incorporated by reference into this prospectus supplement and the accompanying base shelf prospectus.
The Company has not authorized anyone to provide you with different information.
The Common Shares covered hereby may be
offered only in the jurisdictions where such offers are permitted and the Common Shares are not being offered or sold in any jurisdiction
where the offer or sale is not permitted. You should assume that the information contained in this
prospectus supplement, the accompanying base shelf prospectus and the documents incorporated by reference herein and therein is
accurate only as of their respective dates, regardless of the time of delivery of this prospectus supplement and the accompanying
base shelf prospectus. Our business, financial condition, results of operations and prospects may have changed since those
dates.
Market data and certain
industry forecasts used in this prospectus supplement and the documents incorporated by reference in this prospectus supplement
and the accompanying base shelf prospectus were obtained from market research, publicly available information and industry publications.
We believe that these sources are generally reliable, but the accuracy and completeness of this information is not guaranteed.
We have not independently verified such information, and we do not make any representation as to the accuracy of such information.
In this prospectus supplement
and the accompanying base shelf prospectus, unless otherwise indicated, all dollar amounts and references to “$” or
“US$” are to U.S. dollars and references to “C$” are to Canadian dollars. This prospectus supplement and
the underlying base shelf prospectus and the documents incorporated by reference herein and therein contain translations of some
Canadian dollar amounts into U.S. dollars solely for your convenience. See “Exchange Rate Information”.
On September 18, 2018,
the Company effected a share consolidation (reverse stock split) of its issued and outstanding Common Shares on the basis of one
post-consolidation Common Share for every one hundred pre-consolidation Common Shares. On June 25, 2019, the Company effected
a further share consolidation (reverse stock split) of its issued and outstanding Common Shares on the basis of one post-consolidation
Common Share for every ten pre-consolidation Common Shares. All references in this prospectus supplement to Common Shares, options
and exercise or purchase prices have been retroactively adjusted to reflect the share consolidations. The aggregate principle amount
of 2019 Notes (as defined below) were not affected by the consolidation, but the Common Shares issuable upon conversion of the
2019 Notes will be adjusted proportionally to the share consolidation ratio.
In this prospectus supplement
and the accompanying base shelf prospectus, unless the context otherwise requires, references to “we”, “us”,
“our” or similar terms, as well as references to “Neovasc” or the “Company”, refer to Neovasc
Inc., either alone or together with our subsidiaries.
This prospectus supplement,
the accompanying base shelf prospectus and the documents incorporated by reference herein and therein include references to trade
names and trade-marks of other companies, which trade names and trade-marks are the property of their respective owners.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus supplement
and the accompanying base shelf prospectus, including the documents incorporated by reference herein and therein, contain forward-looking
statements within the meaning of applicable Canadian securities legislation and the U.S. Private Securities Litigation Reform Act
of 1995 that may not be based on historical fact, including, without limitation, statements containing the words “believe”,
“may”, “plan”, “will”, “estimate”, “continue”, “anticipate”,
“intend”, “expect” and similar expressions. Forward- looking statements are necessarily based on estimates
and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future
developments, as well as the factors we believe are appropriate. Forward-looking statements in this prospectus supplement and the
accompanying base shelf prospectus and the documents incorporated by reference herein and therein include, but are not limited
to, statements relating to:
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our ability to continue as a going concern;
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our need for significant additional financing and our estimates regarding our capital requirements
and future revenues, expenses and profitability;
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our intention to monitor the Company’s market value on the Nasdaq and our expectation that
the Common Shares will continue to be listed and traded on the Nasdaq;
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our intended use of the net proceeds from the Offering;
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our intended use of the net proceeds from the December Offering;
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our intended use of the net proceeds from the August 2020 offering (the "August Offering”)
of units comprised of one Common Share and three-quarters of one common share purchase warrants (the “August Units”);
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our intended use of the net proceeds from the June 2020 offering (the "June Offering”)
of units comprised of one Common Share and three-quarters of one common share purchase warrants (the “June Units”);
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our intended use of the net proceeds from the May 2020 private placement offering of the secured
convertible notes (the “2020 Notes”) and common share purchase warrants
(the “May 2020 Warrants”);
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our estimates regarding our fully diluted share capital and future dilution to shareholders;
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our intention to remediate our material weakness in internal control over financial reporting (“ICFR”)
as of December 31, 2019, 2018 and 2017;
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our intention to expand the indications for which we may market the Tiara (which does not have
regulatory approval and is not commercialized) and the Reducer (which has CE Mark approval for sale in the European Union);
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clinical development of our products, including the results of current and future clinical trials
and studies;
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our anticipation that the Tiara will receive CE Mark approval in Europe from the Medical Device
Directive in 2021;
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the anticipated timing of additional implantations in the TIARA-II trial and our intention to initiate
additional investigational sites in 2021 as required approvals are obtained;
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our plans to develop and commercialize products, including the Tiara, and the timing and cost of
these development programs;
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our plans to develop and commercialize the Tiara transfemoral trans-septal system, including our
ability to improve current prototypes;
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our ability to grow revenues from the Reducer in a timely manner;
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whether we will receive, and the timing and costs of obtaining, regulatory approvals;
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our efforts to obtain approval for entrance into the U.S. market for the Reducer, including our
discussions with the U.S. Food and Drug Administration (the “FDA’’) and potential pathways to the U.S. market;
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the cost of post-market regulation and commercialization if we receive necessary regulatory approvals;
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our ability to enroll patients in our clinical trials, studies and compassionate use cases in Canada,
the United States, Europe, Israel and other markets;
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our ability to advance and complete the COSIRA-II IDE pivotal clinical trial;
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our belief that the full PMA application pathway brings the best chance of success within reasonable
cost and time constraints for Tiara;
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our belief that the TIARA-I Early Feasibility study demonstrates the safety of the Neovasc transcatheter
mitral valve replacement system;
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our belief that the clinical evidence already available will be sufficient to support the availability
of Tiara for the treatment of patients in Europe;
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our intention to continue directing a significant portion of our resources into sales expansion;
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our ability to get our products approved for use;
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the benefits and risks of our products as compared to others;
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our ability to find strategic alternatives for adoption of the Reducer, including potential alliances
in order to broaden and deepen therapy penetration and potentially advance the COSIRA-II study;
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our plans to increase Reducer implants in Europe in 2021;
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our expectation that in 2021 more German clinics will negotiate and finalize reimbursement negotiations
with German insurance companies relating to the Reducer;
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our estimates of the size of the potential markets for our products including the anticipated market
opportunities for the Reducer and the Tiara;
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our potential relationships with distributors and collaborators with acceptable development, regulatory
and commercialization expertise and the benefits to be derived from such collaborative efforts;
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sources of revenues and anticipated revenues, including contributions from distributors and other
third-parties, product sales, license agreements and other collaborative efforts for the development and commercialization of products;
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our ability to meet our financial and organizational restructuring goals to establish a lean and
accountable organization with stable capitalization;
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our ability to meet our cash expenditure covenants;
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our creation of an effective direct sales and marketing infrastructure for approved products we
elect to market and sell directly;
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the rate and degree of market acceptance of our products;
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the timing and amount of reimbursement for our products;
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the composition and compensation of our management team and board of directors;
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the impact of foreign currency exchange rates; and
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the composition and compensation of our board of directors and senior management team in the future.
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Forward-looking statements reflect our current views
with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates
and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic, competitive,
political and social uncertainties and contingencies, many of which, with respect to future events, are subject to change. As
of the date of this prospectus supplement, the extent to which the COVID-19 pandemic may materially impact the Company's financial
condition, liquidity, or results of operations is uncertain. The material factors and assumptions used by us to develop such forward-looking
statements include, but are not limited to:
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our ability to continue as a going concern;
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our regulatory and clinical strategies will continue to be successful;
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our current positive interactions with regulatory agencies will continue;
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recruitment to clinical trials and studies will continue;
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the time required to enroll, analyze and report the results of our clinical studies will be consistent
with projected timelines;
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current and future clinical trials and studies will generate the supporting clinical data necessary
to achieve approval of marketing authorization applications;
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the regulatory requirements for approval of marketing authorization applications will be maintained;
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our current good relationships with our suppliers and service providers will be maintained;
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our estimates of market size and reports reviewed by us are accurate;
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our efforts to develop markets and generate revenue from the Reducer will be successful;
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genericisation of markets for the Tiara and the Reducer will develop;
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capital will be available on terms that are favorable to us;
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our ability to retain and attract key personnel, including members of our board of directors and
senior management team; and
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our estimates and assumptions about the impact that the COVID-19 crisis will have on the Company.
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By their very nature, forward-looking
statements or information involve known and unknown risks, uncertainties and other factors that may cause our actual results, events
or developments, or industry results, to be materially different from any future results, events or developments expressed or implied
by such forward- looking statements or information. In evaluating these statements, prospective purchasers should specifically
consider various factors, including the risks outlined herein and in the accompanying base shelf prospectus and in documents incorporated
by reference herein and therein, under the heading “Risk Factors”. Some of these risks and assumptions include,
among others:
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the substantial doubt about our ability to continue as a going concern;
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risks related to the recent coronavirus outbreak or other health epidemics, which could significantly
impact our operations, sales or ability to raise capital;
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risks relating to our need for significant additional future capital and our ability to raise additional
funding;
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risks relating to the sale of a significant number of Common Shares;
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risks relating to the possibility that our Common Shares may be delisted from the Nasdaq or the
TSX, which could affect their market price and liquidity;
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risks relating to the Company’s conclusion that it did not have an effective ICFR as of December 31, 2019,
2018 and 2017;
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risks relating to our Common Share price being volatile;
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risks relating to the influence of significant shareholders of the Company over our business operations
and share price;
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risks related to the recent COVID-19 outbreak or other health epidemics, which could continue to
have a significant impact on our operations, sales or ability to raise capital;
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risks relating to our significant indebtedness, and its effect on our financial condition;
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risks relating to lawsuits that we are subject to, which could divert our resources and result
in the payment of significant damages and other remedies;
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risks relating to claims by third-parties alleging infringement of their intellectual property
rights;
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our ability to establish, maintain and defend intellectual property rights in our products;
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risks relating to results from clinical trials of our products, which may be unfavorable or perceived
as unfavorable;
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our history of losses and significant accumulated deficit;
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risks associated with product liability claims, insurance and recalls;
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risks relating to use of our products in unapproved circumstances, which could expose us to liabilities;
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risks relating to competition in the medical device industry, including the risk that one or more
competitors may develop more effective or more affordable products;
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risks relating to our ability to achieve or maintain expected levels of market acceptance for our
products, as well as our ability to successfully build our in-house sales capabilities or secure third-party marketing or distribution
partners;
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our ability to convince public payors and hospitals to include our products on their approved products
lists;
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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;
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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;
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risks associated with the extensive regulation of our products and trials by governmental authorities,
as well as the cost and time delays associated therewith;
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risks associated with post-market regulation of our products;
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health and safety risks associated with our products and our industry;
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risks associated with our manufacturing operations, including the regulation of our manufacturing
processes by governmental authorities and the availability of two critical components of the Reducer;
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risk of animal disease associated with the use of our products;
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risks relating to the manufacturing capacity of third-party manufacturers for our products, including
risks of supply interruptions impacting the Company’s ability to manufacture its own products;
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risks relating to our dependence on limited products for substantially all of our current revenues;
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risks relating to our exposure to adverse movements in foreign currency exchange rates;
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risks relating to the possibility that we could lose our foreign private issuer status under U.S.
federal securities laws;
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risks relating to the possibility that we could be treated as a “passive foreign investment
company” (“PFIC”);
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risks relating to breaches of anti-bribery laws by our employees or agents;
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risks associated with future changes in financial accounting standards and new accounting pronouncements;
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risks relating to our dependence upon key personnel to achieve our business objectives;
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our ability to maintain strong relationships with physicians;
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risks relating to the sufficiency of our management systems and resources in periods of significant
growth;
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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;
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risks relating to our ability to successfully identify and complete corporate transactions on favorable
terms or achieve anticipated synergies relating to any acquisitions or alliances;
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risks relating to conflicts of interests among the Company’s officers and directors as a
result of their involvement with other issuers;
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risks relating to future issuances of equity securities by us, or sales of Common Shares or conversions
of convertible notes by our existing security holders, causing the price of our securities to fall;
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risks relating to the broad discretion in our use of proceeds from an offering of our securities;
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risks relating to our intention to not pay dividends in the foreseeable future; and
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anti-takeover provisions in our constating documents which could discourage a third-party from
making a takeover bid beneficial to our shareholders.
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Should one or more of these
risks or uncertainties or a risk that is not currently known to the Company materialize, or should assumptions underlying the forward-looking
statements prove incorrect, actual results may vary materially from those expressed or implied herein. These forward-looking statements
are made as of the date of this prospectus supplement or, in the case of documents incorporated by reference in this prospectus
supplement, as of the date of such documents, and we do not intend, and do not assume any obligation, to update these forward-looking
statements, except as required by law. Investors are cautioned that forward- looking statements are not guarantees of future performance
and investors are cautioned not to put undue reliance on forward-looking statements due to their inherent uncertainty.
DOCUMENTS INCORPORATED BY REFERENCE
This
prospectus supplement is deemed to be incorporated by reference into the accompanying base shelf prospectus solely for the purposes
of the Offering. Information has been incorporated by reference in this prospectus supplement from documents filed with securities
commissions or similar authorities in Canada. Copies of the documents incorporated by reference in this prospectus supplement
and not delivered with this prospectus supplement may be obtained on request without charge from Chris Clark, the Company Secretary
of Neovasc, at Suite 5138 — 13562 Maycrest Way, Richmond, British Columbia, V6V 2J7, Canada, telephone: (604) 270-4344
or by accessing the disclosure documents through the Internet on the Canadian System for Electronic Document Analysis and Retrieval
(“SEDAR”), at www.sedar.com. Documents filed with, or furnished to, the SEC are available through the SEC’s
Electronic Data Gathering and Retrieval System (“EDGAR”), at www.sec.gov.
The following documents,
filed with the securities commissions or similar regulatory authorities in certain provinces of Canada and filed with, or furnished
to, the SEC are specifically incorporated by reference into, and form an integral part of, this prospectus supplement and the accompanying
base shelf prospectus:
Any documents of the type
described in Section 11.1 of Form 44-101F1 – Short Form Prospectuses filed by the Company with a securities
commission or similar authority in any province of Canada subsequent to the date of this prospectus supplement and before withdrawal
or completion of the Offering, will be deemed to be incorporated by reference into this prospectus supplement.
In
addition, to the extent that any document or information incorporated by reference into this prospectus supplement is filed with,
or furnished to, the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
after the date of this prospectus supplement, such document or information will be deemed to be incorporated by reference as an
exhibit to the registration statement of which this prospectus supplement forms a part (in the case of a report on Form 6-K,
if and to the extent expressly provided therein).
Any statement contained
in this prospectus supplement or in the accompanying base shelf prospectus, or in a document incorporated or deemed to be incorporated
by reference herein or therein will be deemed to be modified or superseded for purposes of this prospectus supplement to the extent
that a statement contained herein or therein or in any other subsequently filed document that also is or is deemed to be incorporated
by reference herein or therein modifies or supersedes such statement. The modifying or superseding statement need not state that
it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or
supersedes. The making of a modifying or superseding statement is not to be deemed an admission for any purposes that the modified
or superseded statement, when made, constituted a misrepresentation, an untrue statement of material fact or an omission to state
a material fact that is required to be stated or is necessary to make a statement not misleading in light of the circumstances
in which it was made. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute
a part of this prospectus supplement or the accompanying base shelf prospectus.
Upon filing a new annual
information form, or a new annual report on Form 20-F, as applicable, and the related annual consolidated financial statements
and management’s discussion and analysis with applicable securities regulatory authorities during the currency of this prospectus
supplement and the accompanying base shelf prospectus, the previous annual information form or annual report on Form 20-F,
as applicable, annual consolidated financial statements and management’s discussion and analysis and all interim consolidated
financial statements and the related management’s discussion and analysis, supplemental information, material change reports
and information circulars filed prior to the commencement of the Company’s financial year in which the new annual information
form or annual report on Form 20-F is filed will be deemed no longer to be incorporated for purposes of future offers and
sales of our securities under this prospectus supplement. Upon interim consolidated financial statements and the accompanying management’s
discussion and analysis and material change report being filed by the Company with the applicable securities regulatory authorities
during the duration of this prospectus supplement and the accompanying base shelf prospectus, all interim consolidated financial
statements and the accompanying management’s discussion and analysis and material change report filed prior to the new interim
consolidated financial statements shall be deemed no longer to be incorporated herein or therein for purposes of future offers
and sales of securities under this prospectus supplement.
References to our website
in any documents that are incorporated by reference into this prospectus supplement and the accompanying base shelf prospectus
do not incorporate by reference the information on such website into this prospectus supplement or the accompanying base shelf
prospectus, and we disclaim any such incorporation by reference.
DOCUMENTS FILED AS PART OF THE REGISTRATION
STATEMENT
The following documents
have been or will be filed with the SEC as part of the registration statement of which this prospectus supplement and the accompanying
base shelf prospectus forms a part: (i) the documents listed under the heading “Documents Incorporated by Reference”;
(ii) powers of attorney from our directors and officers; and (iii) the consent of Grant Thornton LLP.
EXCHANGE RATE INFORMATION
The following table sets
forth for each period indicated: (i) the daily average exchange rate in effect at the end of the period; (ii) the high
and low daily average exchange rate during such period; and (iii) the daily average exchange rate for such period, for one
Canadian dollar, expressed in U.S. dollars, as quoted by the Bank of Canada.
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
Closing
|
|
|
0.7330
|
|
|
|
0.7699
|
|
|
|
0.7854
|
|
|
|
0.7725
|
|
|
|
0.7551
|
|
|
|
0.7497
|
|
|
High
|
|
|
0.8138
|
|
|
|
0.7699
|
|
|
|
0.7863
|
|
|
|
0.8138
|
|
|
|
0.7670
|
|
|
|
0.7710
|
|
|
Low
|
|
|
0.7330
|
|
|
|
0.7353
|
|
|
|
0.6898
|
|
|
|
0.7513
|
|
|
|
0.7353
|
|
|
|
0.6898
|
|
|
Average(1)
|
|
|
0.7721
|
|
|
|
0.7537
|
|
|
|
0.7461
|
|
|
|
0.7769
|
|
|
|
0.7524
|
|
|
|
0.7391
|
|
(1) Determined by averaging the rates on the last day of
each month during the respective period.
On February 3, 2021, the daily average
exchange rate as quoted by the Bank of Canada was C$1.00 = US$0.7823.
THE COMPANY
The following description
of the Company is derived from selected information about the Company contained in the documents incorporated by reference and
does not contain all of the information about the Company and its business that should be considered before investing in the securities.
This prospectus supplement, the accompanying base shelf prospectus and the documents incorporated by reference herein and therein
should be reviewed and considered by prospective purchasers in connection with their investment in the securities.
Neovasc was incorporated
on November 2, 2000 under the laws of the Province of British Columbia and was continued to federal jurisdiction under the
Canada Business Corporations Act (“CBCA”) on April 19, 2002. Neovasc has seven wholly owned subsidiaries,
four of which are material: (i) Neovasc Tiara Inc. (“NTI”), a corporation incorporated under the federal
laws of Canada; (ii) Neovasc Medical Ltd. (“NML”), a corporation incorporated under the laws of Israel;
and (iii) Neovasc Medical Inc. (“NMI”), a corporation incorporated under the laws of British Columbia and
(iv) Neovasc (US) Inc. (“NUS”), a corporation incorporated under the laws of Delaware.
Our registered office is
located at Suite 2600 — 595 Burrard Street, Vancouver, British Columbia, V7X 1L3, Canada and our head office and principal
place of business are located at Suite 5138 — 13562 Maycrest Way, Richmond, British Columbia, V6V 2J7, Canada.
Neovasc is a specialty
medical device company that develops, manufactures and markets products for the rapidly growing cardiovascular marketplace. Its
products include the Reducer, for the treatment of refractory angina, which is not currently commercially available in the United
States and has been commercially 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.
Neovasc’s business
operations started in March 2002, with the acquisition of NMI (formerly PM Devices Inc.). NMI manufactured a line of collagen-based
surgical patch products. The products are made from chemically treated pericardial tissue. In 2012, the Company sold the rights
to the surgical patch products to LeMaitre Vascular, Inc. (“LeMaitre”), but retained rights to the underlying
tissue technology for all other uses.
In May 2003, Neovasc
acquired Angiometrx Inc. (“ANG”). ANG developed a technology called the Metricath, a catheter-based device that
allowed clinicians to measure artery and stent size and confirm deployment during interventional treatment of coronary and peripheral
artery disease. In 2009, Neovasc ceased all activities related to Metricath and on January 1, 2015 ANG was amalgamated into
NMI.
In July 2008, Neovasc
acquired two pre-commercial vascular device companies based in Israel: NML and B-Balloon Ltd. (“BBL”). NML developed
and owned intellectual property related to the Reducer, a novel catheter-based treatment for refractory angina, a debilitating
condition resulting from inadequate blood flow to the heart muscle. In 2009, Neovasc ceased all activities related to BBL’s
technologies and is in the process of voluntarily liquidating BBL.
In late 2009, Neovasc started
initial activities to develop novel technologies for the catheter-based treatment of mitral valve disease. Based on the positive
results of these activities, the Company launched a program to develop the Tiara transcatheter mitral valve.
Additionally, throughout
the years 2014 to 2017, the Company announced a number of developments pertaining to litigation, all as more fully discussed under
the heading “Trends, Risks and Uncertainties” and “Contractual Obligations and Contingencies”
in the Interim MD&A.
The Company and its
subsidiaries now operate as follows: Neovasc Inc. is the Canadian public company and 100% owner of each of the subsidiary
entities. NMI and NUS are the operating companies for the group. They hold the majority of the tangible assets and NMI holds
the Peripatch tissue license. NMI and NUS employ the majority of the employees of the Company. NTI holds all the intangible
assets related to the Tiara and NML holds all the intangible assets related to the Reducer. NMI charges both NTI and NML for
the development services performed by its employees to develop the Tiara and the Reducer respectively. NML receives a royalty
based on the Reducer revenues generated by NMI. NUS charges NMI for development services performed by its employees to
develop the Tiara and the Reducer, respectively, and these fees are then passed on through NMI to NTI and NML, respectively.
Neovasc GmbH conducts sales and marketing activities on behalf of NMI as part of the license agreement between NML and NMI
for NMI to manufacture, distribute and sell the Reducer on behalf of NML. Neovasc Management Inc., provides executive
management services to Neovasc Inc.
In late 2016, Neovasc sold
its tissue processing technology and facility for US$67,909,800 to Boston Scientific Corporation (“Boston Scientific”),
and concurrently, Boston Scientific invested an additional US$7,090,200 in Neovasc for a 15% equity interest in the Company. Under
the terms of the equity investment, Boston Scientific purchased 1,181 common shares of Neovasc at a price of US$6,000 per common
share, for gross proceeds of US$7,090,200. Under the terms of the asset purchase agreement, Neovasc has been granted a license
to the purchased assets and access to the sold facilities to allow it to continue its tissue and valve assembly activities for
its remaining customers, and continue its own tissue-related programs, including advancing the Tiara through its clinical and regulatory
pathways. Substantially all of the proceeds (US$70 million) from sale of the asset and investment in the Company were placed in
escrow to cover the cost of the litigation damages.
In November 2017,
Neovasc completed the 2017 underwritten public offering (the “2017 Public Financing” and collectively with the
2017 private placement, the “2017 Financings”) and the 2017 private placement, for aggregate gross proceeds
of approximately US$65 million. The Company used the net proceeds of the 2017 Financings to fully fund the approximately US$42
million balance of the damages and interest awards in its litigation with Edwards Lifesciences CardiAQ LLC (“CardiAQ”)
formerly known as CardiAQ Valve Technologies Inc., (after subtracting the approximately US$70 million that the Company had paid
into escrow), with remaining funds being used (i) to partially fund the ongoing Tiara clinical program; (ii) to support
the completion of the TIARA II study; and (iii) for general corporate purposes. All securities issued pursuant to the 2017
Financings have been converted or redeemed, and no warrants or notes remain issued pursuant to the 2017 Financings remain outstanding.
For a description of the terms of the 2017 Financings and the securities issued pursuant to the 2017 Financings, see “Operating
Results” and “Share Capital” of the Company's Annual Report on Form 20-F and the form of notes
issued pursuant to the 2017 Financings (the “2017 Notes”), each as filed or furnished under the Company’s
profiles on SEDAR at www.sedar.com and on the SEC’s website at www.sec.gov.
On February 28, 2019,
the Company completed an underwritten public offering (the “February 2019 Financing”) of 1,111,111 Common
Shares, at a price of US$4.50 per Common Share, for gross proceeds of approximately US$5 million before deducting the underwriting
commission and offering expenses payable by the Company. The Company used the net proceeds of the February 2019 Financing
for the development and commercialization of the Reducer, development of the Tiara and general corporate and working capital purposes.
As part of the underwriter's compensation in the February 2019 Financing, the Company issued the underwriter warrants (the
“February Broker Warrants”) to purchase in aggregate up to a 72,222 Common Shares, exercisable at a price
per Common Share equal to US$5.625 for a period of three years following issuance.
On March 15,
2019, the Company completed an underwritten public offering (the “March 2019 Financing”) of 1,111,111
Common Shares, at a price of US$4.50 per Common Share, for gross proceeds of approximately US$5 million before deducting the
underwriting commission and offering expenses payable by the Company. The Company intends to use the approximately US$4.2
million net proceeds of the March 2019 Financing for the development and commercialization of the Reducer, development
of the Tiara and general corporate and working capital purposes. As part of the underwriter's compensation in the
March 2019 Financing, the Company issued the underwriter warrants (the “March Broker Warrants”,
and together with the February Broker Warrants, the "2019 Broker Warrants") to purchase in aggregate up
to a 72,222 Common Shares, exercisable at a price per Common Share equal to US$5.625 for a period of three years following
issuance.
On
May 16, 2019, the Company completed the May 2019 private placement offering of secured convertible debentures
and Common Shares (the “May 2019 Financing” and together with the February 2019 Financing and March 2019
Financing, the “2019 Financings”) issuing (i) the 15% original issue discount
2019 Note with a face value of US$11.5 million, for gross proceeds to the Company of US$9,775,000, and (ii) 334,951 Common
Shares at a price of US$5.15 per Common Share, for gross proceeds to the Company of US$1,725,000.
On June 4, 2019, Dr. William
O’Neill resigned from the board of Directors and Fred Colen was elected in his place, and on September 16, 2019, Jane
Hsiao resigned from the board of Directors and Norman Radow was appointed in her place.
On January 6, 2020,
the Company completed the registered direct January 2020 Offering of an aggregate of 1,185,000 series A units ("Series A
Units") and 1,241,490 series B units ("Series B Units") at a price of US$4.1351 per Series A
Unit and US$4.135 per Series B Unit for aggregate gross proceeds to the Company of approximately US$10 million, before deducting
placement agent's fees and estimated expenses of the offering payable by the Company. Each Series A Unit consisted of one
Common Share and one warrant (a "January 2020 Warrant") to purchase one common share. Each January 2020 Warrant
entitles the holder to acquire one common share of the Company at a price of US$4.1351 at any time prior to the date which is four
years following the date of issuance. Each Series B Unit consists of one pre-funded warrant of the Company (each, a "January 2020
Pre-Funded Warrant") and one January 2020 Warrant. Each January 2020 Pre-Funded Warrant entitles the holder to acquire
one common share of the Company at a price of US$0.0001 at any time until the exercise in full of each Pre-Funded Warrant.
On May 26, 2020, the
Company made a final payment of US$2,897,000 to holders of the 2017 Notes and US$1,016,000 in 2017 Notes was converted for the
issuance of 500,014 Common Shares. The Company and certain holders of the 2017 Notes have also agreed to a mutual release in return
for the issuance by the Company, in the aggregate, of 500,000 Settlement Warrants to such holders.
On May 28, 2020, the
Company completed the May Offering of the 2020 Notes with a principal amount of US$5 million, convertible at US$2.815 per
Common Share for 1,776,041 Common Shares and 2,573,959 May 2020 Warrants exercisable at US$2.634 per May 2020 Warrant
share with a 4-year term. The May Offering was completed in two tranches comprised of an initial closing of US$4 million aggregate
principal amount of 2020 Notes and 2,573,959 May 2020 Warrants and an additional closing of US$1,000,000 aggregate principal
amount of 2020 Notes.
On June 16, 2020,
the Company completed the registered direct June Offering of an aggregate 3,883,036 June Units at a price of US$2.973
per unit for aggregate gross proceeds to the Company of approximately US$11,500,000 before deducting placement agent’s fee
and estimated expenses of the June Offering payable by the Company.
On July 9, 2020 the
Company announced that it had been informed by the FDA that the Circulatory System Devices Panel of the Medical Devices Advisory
Committee will review the PMA for the Reducer at its October 27, 2020 meeting.
On July 23, 2020
SMG exercised 1,424,049 of the 2,573,959 May 2020 Warrants at an exercise price of US$2.634 per May 2020 Warrant
for aggregate exercise proceeds to the Company of US$3,750,945.07 (the "July Exercise Proceeds"). Using
the July Exercise Proceeds, the Company has prepaid a portion of the 2019 Notes. The total aggregate amount of the
Exercise Proceeds has been applied to the prepayment of the 2019 Note whereby US$3,613,341.12 has been applied to the
US$11,500,000 principal of the 2019 Note, US$72,266.82 has been paid as a prepayment penalty pursuant to the terms of the
2019 Note and US$65,337.13 has been paid in accrued interest. In connection with the prepayment of the 2019 Note, the Company
also issued to SMG 481,778 common share purchase warrants (the "July Prepayment Warrants") at a current
exercise price of US$7.50 per July Prepayment Warrant in accordance with the terms of the 2019 Note.
On August 12, 2020,
the Company completed the registered direct August Offering of an aggregate 4,527,772 August 2020 Units at a price of
US$2.77575 per unit for aggregate gross proceeds to the Company of approximately US$12,600,000 before deducting placement agent’s
fee and estimated expenses of the June Offering payable by the Company.
On August 17, 2020
SMG exercised 501,000 of the remaining 1,149,910 May 2020 Warrants at an exercise price of US$2.634 per May 2020 Warrant
for aggregate exercise proceeds to the Company of US$1,319,634 (the "August Exercise Proceeds"). Using the
August Exercise Proceeds, the Company has prepaid a portion of the 2019 Notes. The total aggregate amount of the Exercise
Proceeds has been applied to the prepayment of the 2019 Note whereby US$1,263,884.57 has been applied to the remaining US$8,380,505
principal of the 2019 Note, US$25,277.69 has been paid as a prepayment penalty pursuant to the terms of the 2019 Note and US$30,471.74
has been paid in accrued interest. In connection with the prepayment of the 2019 Note, the Company also issued to SMG 168,518 common
share purchase warrants (the "August Prepayment Warrants") at a current exercise price of US$7.50 per August Prepayment
Warrant in accordance with the terms of the 2019 Note.
On October 27, 2020
the Circulatory System Devices Advisory Panel of the FDA voted 14 to 4 in favor that the Reducer is safe when used as intended,
and voted 1 to 17 “against” on the issue of a reasonable assurance of effectiveness. The third vote was 13 to 3 “against”
(2 abstained) on whether the relative benefits outweighed the relative risks.
On December 10, 2020
the Company completed the registered direct December Offering of an aggregate 6,230,803 December Units at a price of
US$0.9801 per unit for aggregate gross proceeds to the Company of approximately US$6,100,000 before deducting placement agent’s
fee and estimated expenses of the December Offering payable by the Company.
On
December 10, 2020 and December 14, 2020, the Company received written notifications (the “Notification Letters”)
from the Nasdaq notifying that the Company is not currently in compliance with the Nasdaq’s continued listing requirements
which require that an issuer’s listed securities maintain a total market value of US$35 million (the “Market Value
Requirements”) and a minimum bid price of at least US$1.00 per share (the “Minimum Bid Price Requirements”).
In accordance with Nasdaq Listing Rules, the Company has until June 8, 2021 to regain compliance with the Market Value
Requirements and until June 14, 2021 to regain compliance with the Minimum Bid Price Requirements. In the event the Company
does not regain compliance by the applicable deadlines, the Company may be eligible for additional time to regain compliance or
may face delisting. The Notification Letters do not impact the Company's listing on the Nasdaq at this time and the Company intends
to monitor its market value between now and the applicable deadlines. During this time, we expect that the Common Shares will continue
to be listed and trade on the Nasdaq. The Company's business operations are not affected by the receipt of the Notification Letters.
The Company is also listed on the Toronto Stock Exchange and the Notification Letters do not affect the Company's compliance status
with such listing.
Recent Developments
On January 15, 2021,
the Company received a "not approvable" letter from the FDA regarding its PMA submission for the Reducer. The FDA reviewed
Reducer for treatment of patients with refractory angina pectoris despite guideline directed medical therapy, who are unsuitable
for revascularization by coronary artery bypass grafting or by percutaneous coronary intervention.
Reducer
The Company reported positive
third quarter Reducer revenue results, but at the same time guided that the fourth quarter could be impacted by COVID-19. The Company
has seen a significant impact in the fourth quarter Reducer revenue as anticipated and plans to report its final fourth quarter
and full year revenue in its fourth quarter earnings report. The Company expects that the Reducer revenue generation in the fourth
quarter of 2020 and potentially well into 2021 will be negatively impacted by COVID-19 related restrictions and delays in hospital
procedures. Underlying demand may not return once COVID-19 has been controlled once again. The Company plans to continue to advance
our reimbursement strategy but the outcome of any reimbursement activity worldwide may be uncertain, both in timing because of
COVID-19 and in ultimately achieving reimbursement in new territories as planned.
Tiara
The
Company has filed for CE Mark for Tiara TA in Europe under the Medical Device Directive and is targeting a CE Mark decision in
the first half 2021. There is no assurance that European regulatory filing and an approval will be granted in the time frame
anticipated by management or granted at any time in the future. There is no expectation that this product will be revenue-generating
in the near term, although our management believes that the product is addressing an important unmet clinical need. As of
the date of this prospectus, we continue to submit new data to our notified body in response to their questions and some testing
is still ongoing. Some of the results of the ongoing tests are unknown and uncertain, and the some of the known results of
completed or ongoing tests may not be satisfactory for the CE mark approval of the device. In addition, the notified body
has raised and continues to raise issues that may ultimately result in some sizes or the entire Tiara
TA program not achieving CE Mark and we have and will continue to provide evidence and rationale
to challenge and satisfy their concerns. The final decision of the notified body on some of these issues is unknown and uncertain.
It is not known how the notified body will decide on the Tiara TA performance, and, in particular, if the clinical data, biocompatibility,
sterilization techniques, component performance, valve performance and durability, delivery system performance or other known or
unknown aspects of the system will be acceptable or not. Further, the outcome of a potential audit of our quality system
and manufacturing and supply operations cannot be predicted. If we were to be successful in being awarded a CE Mark for the
Tiara TA device, the indication for use may be more restrictive than expected, potentially limiting the patient population.
Finally, it is unclear if Neovasc will be able to attract a partner to support commercialization or if the product will ultimately
be commercialized in Europe at all.
On
Tiara TF, we have encountered delays, primarily due to the COVID-19 virus, and we are still fine-tuning the design of the valve
and of the delivery system. We continue to make device modifications to the implant, and
we continue to learn from our animal testing. We must still successfully complete critical acute animal tests and then, if
successful, start implanting in chronic animals, which will need to survive for 90 days. Only if all of these animal implants
and acute and chronic results are acceptable to us and to the relevant regulatory organization, can we start to work on a decision
from a regulatory organization to allow us to do a first human implant around the second half of 2021.
There can be no assurance as to the timing or ultimate success of the Tiara TF first in-human implant.
Business Development
Activities
The Company has engaged
professional advisors to assist the Company in exploring business development opportunities for one or both of its products.
As previously stated, the Company has explored and expects to continue actively exploring various business development transactions
including, but not limited to, partnerships, licensing transactions and/or divestitures of one or both of its product assets with
the intention of realizing in the near-term all or a portion of the current value of its assets and supporting the long-term viability
of the Company. There can be no assurance as to the terms of any such transactions or the timeline in which any such transactions
will be consummated, if at all.
RISK FACTORS
An investment in the Company’s
securities is highly speculative and involves a significant degree of risk. In addition to the other information included or incorporated
by reference in this prospectus supplement and the accompanying base shelf prospectus, you should carefully consider the risks
and uncertainties described under the heading “Risk Factors” in the accompanying base shelf prospectus and the Form 20-F,
together with all of the other information contained in this prospectus supplement and the accompanying base shelf prospectus,
before purchasing the Company’s securities. The occurrence of any of the risks mentioned herein or under the heading “Risk
Factors” in the accompanying base shelf prospectus and the Form 20-F could have a material adverse effect on the Company’s
business, financial condition, results of operations and future prospects. In these circumstances, the market price of the Company’s
securities, including Common Shares, could decline, and you may lose all or part of your investment. The risks set out herein and
under the heading “Risk Factors” in the accompanying base shelf prospectus and the Form 20-F are not the only
risks the Company faces; risks and uncertainties not currently known to it or that the Company currently deems to be immaterial
may also materially and adversely affect its business, financial condition and results of operations. Investors should also refer
to the other information set forth or incorporated by reference in this prospectus supplement and the accompanying base shelf prospectus,
including the Company’s consolidated financial statements and related notes. This prospectus supplement also contains forward-looking
statements that involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated
in the forward-looking statements as a result of a number of factors, including the risks described herein and under the heading
“Risk Factors” in the accompanying base shelf prospectus and the Form 20-F. See “Cautionary Note
Regarding Forward-Looking Statements” above.
Our Common Shares
may be delisted from the Nasdaq or the TSX, which could affect their market price and liquidity. If our Common Shares were to be
delisted, investors may have difficulty in disposing of their shares.
Our Common Shares are currently
listed on the Nasdaq and on the TSX under the symbol “NVCN”. We must meet continuing listing requirements to
maintain the listing of our Common Shares on the Nasdaq and the TSX. For example, for continued listing, the Nasdaq requires, among
other things, that an issuer’s listed securities maintain a total market value of US$35 million pursuant to Nasdaq Listing
Rule 5550(b)(2) and a minimum bid price of at least US$1.00 per share pursuant to Nasdaq Listing Rule 5550(a)(2).
On December 10, 2020 and December 14, 2020, the Company received the Notification Letters from the Nasdaq notifying that
the Company is not currently in compliance with the Nasdaq’s Market Value Requirements and Minimum Bid Price Requirements
respectively.
In
accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company was provided 180 calendar days, or until June 8, 2021
to regain compliance with the Market Value Requirements. To regain compliance with the Market Value Requirements, the market
value of our listed securities have to have exceeded US$35 million for a minimum of 10 consecutive business days. In accordance
with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until June 14, 2021 to regain
compliance with the Minimum Bid Price Requirements. To regain compliance with the Minimum Bid Price Requirements, the Common Shares
must have a closing bid price of at least US$1.00 for a minimum of 10 consecutive business days. In the event the Company does
not regain compliance by the applicable deadlines, the Company may be eligible for additional time to regain compliance or may
face delisting.
In addition to the specified
criteria for continued listing, the Nasdaq also has broad discretionary public interest authority that it can exercise to apply
additional or more stringent criteria for the continued listing of the Common Shares, or suspend or delist securities even though
the securities met all enumerated criteria for continued listing on the Nasdaq. We cannot assure you that the Nasdaq will not exercise
such discretionary authority.
There can be no
assurance that our Common Shares will remain listed on the Nasdaq or the TSX. If we fail to meet or regain compliance with
any of the Nasdaq’s or the TSX’s continued listing requirements, our Common Shares may be delisted. Any delisting
of our Common Shares may adversely affect a shareholder’s ability to dispose, or obtain quotations as to the market
value, of such shares.
Risks Associated with the Offering
Volatility of Market Price of the
Securities
The market price of the Common Shares has
been and may continue to be volatile in the future and subject to wide fluctuations and will be based on a number of factors, including:
(i) the prevailing interest rates being paid by companies similar to the Company; (ii) the overall condition of the financial
and credit markets; (iii) interest rate volatility; (iv) the markets for similar securities; (v) the financial condition,
results of operation and prospects of the Company; (vi) changes in the industry in which the Company operates and competition
affecting the Company; and (vii) general market and economic conditions. The condition of the financial and credit markets
and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. Fluctuations in these factors
could have an adverse effect on the market price of the Common Shares.
USE OF PROCEEDS
From time to time, when
December Warrants are exercised, the Company may receive proceeds equal to the aggregate exercise price of such December Warrants
unless any December Warrants are exercised, with the consent of the Company, on a “cashless” basis. The Company
has agreed to permit the cashless exercise of December Warrants exercisable for 2,857,000 Common Shares, which would result
in the issuance of approximately 961,192 Common Shares. Assuming that all of the remaining December Warrants are exercised
for cash prior to the expiry date, the Company would receive net proceeds of approximately US$2,887,975 upon exercise of the Warrants.
It
is currently intended that the Company will use any proceeds for development and commercialization of the Reducer, development
of the Tiara and general corporate and working capital purposes. The actual amount that the Company spends in connection with each
of the intended uses of proceeds, if such proceeds are received, may vary significantly, and will depend on a number of factors,
including those listed under “Risk Factors” in or incorporated by reference in this prospectus supplement and
the accompanying base shelf prospectus.
PRIOR SALES
The
following table sets forth information in respect of the Common Shares that we issued upon the exercise of options granted under
our incentive stock option plan during the twelve-month period preceding the date of this prospectus
supplement.
|
Exercise Date
|
|
Number of Common Shares
|
|
|
Exercise Price
|
|
N/A
|
|
0
|
|
|
$
|
0.00
|
|
|
Total
|
|
0
|
|
|
$
|
0.00
|
|
The following table sets
forth information in respect of options to acquire Common Shares that we granted under our incentive stock option plan during the
twelve-month period preceding the date of this prospectus supplement.
|
Grant Date
|
|
Number of Options
|
|
|
Grant Price
|
|
|
June 22, 2020
|
|
705,125
|
|
|
$
|
2.42
|
|
|
August 13, 2020
|
|
6,000
|
|
|
$
|
2.27
|
|
|
September 22, 2020
|
|
553,500
|
|
|
$
|
2.11
|
|
|
October 7, 2020
|
|
695,000
|
|
|
$
|
2.17
|
|
|
Total
|
|
1,959,625
|
|
|
$
|
2.24
|
|
The
following table sets forth information in respect of the Common Shares that we issued upon the vesting of restricted share units
(“RSUs”) granted under our restricted share unit plan during the twelve-month period
preceding the date of this prospectus supplement.
|
Vesting Date
|
|
Number of Common Shares
|
|
|
December 2, 2020
|
|
|
50,986
|
|
|
January 25, 2020
|
|
|
36,668
|
|
|
Total
|
|
|
87,654
|
|
The following table sets
forth information in respect of the RSUs that we granted under our restricted share unit plan during the twelve-month period preceding
the date of this prospectus supplement.
|
Grant Date
|
|
Number of RSUs
|
|
|
February 20, 2020
|
|
|
220,000
|
|
|
June 22, 2020
|
|
|
293,044
|
|
|
August 21, 2020
|
|
|
8,000
|
|
|
October 7, 2020
|
|
|
75,000
|
|
|
Total
|
|
|
776,000
|
|
The following table sets
forth information in respect of securities that we issued, other than on exercise of stock options and vesting of RSUs as set out
above, during the 12-month period prior to the date of this prospectus supplement.
|
Issuance Date
|
|
Type of Security
|
|
Number of
Securities
|
|
|
Issue Price
|
|
|
May 19, 2020
|
|
Common Shares issued on conversion of $1,001,000 of the 2017 Notes
|
|
|
492,642
|
|
|
$
|
2.03
|
|
|
May 26, 2020
|
|
Common Shares issued in connection with the Exchange Agreement upon exchange of 672,937 warrant issued for the January 2020 Financing
|
|
|
672,937
|
|
|
$
|
2.71
|
|
|
May 26, 2020
|
|
Common Shares issued on conversion of $15,000 of the 2017 Notes
|
|
|
7,383
|
|
|
$
|
2.03
|
|
|
May 28, 2020
|
|
2020 Notes
|
|
$
|
4,000,000
|
|
|
$
|
4,000,000
|
|
|
May 28, 2020
|
|
May 2020 Warrants
|
|
|
2,573,959
|
|
|
|
Nil
|
|
|
May 28, 2020
|
|
Settlement Warrants
|
|
|
500,000
|
|
|
|
Nil
|
|
|
June 3, 2020
|
|
2020 Notes
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
June 16, 2020
|
|
Common Shares issued related to June Units for June Offering
|
|
|
3,883,036
|
|
|
$
|
2.97
|
|
|
June 16, 2020
|
|
Warrants issued related to June Units for June Offering
|
|
|
2,912,277
|
|
|
$
|
2.88
|
|
|
July 23, 2020
|
|
Common Shares issued related to May 2020 Warrant Exercise
|
|
|
1,424,049
|
|
|
$
|
2.634
|
|
|
July 23, 2020
|
|
Prepayment Warrants issued upon prepayment of May 2019 Note
|
|
|
481,778
|
|
|
|
Nil
|
|
|
August 12, 2020
|
|
Common Shares issued related to August Units for August Offering
|
|
|
4,532,772
|
|
|
$
|
2.78
|
|
|
August 12, 2020
|
|
Warrants issued related to August Units for August Offering
|
|
|
3,399,579
|
|
|
$
|
2.69
|
|
|
August 17, 2020
|
|
Common Shares issued related to May 2020 Warrant Exercise
|
|
|
501,000
|
|
|
$
|
2.634
|
|
|
August 17, 2020
|
|
August Prepayment Warrants issued upon prepayment of May 2019 Note
|
|
|
168,518
|
|
|
|
Nil
|
|
|
December 10, 2020
|
|
Common Shares issued related to December Units for December Offering
|
|
|
6,230,803
|
|
|
$
|
0.9801
|
|
|
December 10, 2020
|
|
Warrants issued related to December Units for December Offering
|
|
|
6,230,803
|
|
|
$
|
0.856
|
|
MARKET FOR SECURITIES
Our Common Shares are listed under the
trading symbol NVCN on the TSX in Canada and on the Nasdaq in the United States. Our Common Shares began trading on the TSX on
June 23, 2014. The following table sets forth, for the periods indicated, the reported high, low and closing prices (in Canadian
dollars) and volume traded on the TSX.
|
Month
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
Total Volume
|
|
|
February 2020
|
|
C$
|
4.15
|
|
C$
|
3.13
|
|
C$
|
3.45
|
|
|
383,473
|
|
|
March 2020
|
|
C$
|
3.82
|
|
C$
|
1.98
|
|
C$
|
2.08
|
|
|
262,720
|
|
|
April 2020
|
|
C$
|
5.30
|
|
C$
|
1.78
|
|
C$
|
3.51
|
|
|
571,845
|
|
|
May 2020
|
|
C$
|
4.26
|
|
C$
|
3.26
|
|
C$
|
3.97
|
|
|
172,108
|
|
|
June, 2020
|
|
C$
|
4.50
|
|
C$
|
3.10
|
|
C$
|
3.25
|
|
|
538,435
|
|
|
July, 2020
|
|
C$
|
3.65
|
|
C$
|
3.01
|
|
C$
|
3.41
|
|
|
234,648
|
|
|
August, 2020
|
|
C$
|
4.05
|
|
C$
|
2.70
|
|
C$
|
2.82
|
|
|
505,675
|
|
|
September 2020
|
|
C$
|
2.96
|
|
C$
|
2.70
|
|
C$
|
2.84
|
|
|
139,769
|
|
|
October 2020
|
|
C$
|
3.48
|
|
C$
|
1.14
|
|
C$
|
1.24
|
|
|
723,367
|
|
|
November 2020
|
|
C$
|
1.26
|
|
C$
|
0.95
|
|
C$
|
1.13
|
|
|
941,741
|
|
|
December 2020
|
|
C$
|
1.43
|
|
C$
|
0.89
|
|
C$
|
1.23
|
|
|
2,246,309
|
|
|
January 2021
|
|
C$
|
1.81
|
|
C$
|
1.14
|
|
C$
|
1.48
|
|
|
2,324,217
|
|
|
February 1-3, 2021
|
|
C$
|
1.73
|
|
C$
|
1.46
|
|
C$
|
1.68
|
|
|
440,385
|
|
Our Common Shares began
trading on the Nasdaq on May 21, 2014. The following table sets forth, for the periods indicated, the reported high, low and
closing prices (in U.S. dollars) and volume traded on the Nasdaq.
|
Month
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
Total Volume
|
|
|
February 2020
|
|
US$
|
3.22
|
|
US$
|
2.36
|
|
US$
|
2.60
|
|
|
748,779
|
|
|
March 2020
|
|
US$
|
2.85
|
|
US$
|
1.38
|
|
US$
|
1.46
|
|
|
488,764
|
|
|
April 2020
|
|
US$
|
3.86
|
|
US$
|
1.25
|
|
US$
|
2.53
|
|
|
1,269,962
|
|
|
May 2020
|
|
US$
|
3.09
|
|
US$
|
2.30
|
|
US$
|
2.88
|
|
|
397,655
|
|
|
June, 2020
|
|
US$
|
3.37
|
|
US$
|
2.27
|
|
US$
|
2.38
|
|
|
1,673,227
|
|
|
July, 2020
|
|
US$
|
2.71
|
|
US$
|
2.23
|
|
US$
|
2.56
|
|
|
784,597
|
|
|
August, 2020
|
|
US$
|
3.05
|
|
US$
|
2.04
|
|
US$
|
2.17
|
|
|
1,806,557
|
|
|
September 2020
|
|
US$
|
2.29
|
|
US$
|
2.05
|
|
US$
|
2.14
|
|
|
527,263
|
|
|
October 2020
|
|
US$
|
2.65
|
|
US$
|
0.87
|
|
US$
|
0.93
|
|
|
2,190,426
|
|
|
November 2020
|
|
US$
|
0.96
|
|
US$
|
0.71
|
|
US$
|
0.86
|
|
|
1,607,197
|
|
|
December 2020
|
|
US$
|
1.14
|
|
US$
|
0.68
|
|
US$
|
0.95
|
|
|
13,018,273
|
|
|
January 2021
|
|
US$
|
1.44
|
|
US$
|
0.89
|
|
US$
|
1.19
|
|
|
5,834,928
|
|
|
February 1-3, 2021
|
|
US$
|
1.34
|
|
US$
|
1.14
|
|
US$
|
1.32
|
|
|
1,018,497
|
|
DESCRIPTION OF THE SHARE CAPITAL
Common Shares
The
Company is authorized to issue an unlimited number of Common Shares without par value. As of February 3,
2021, there were 28,965,584 Common Shares issued and outstanding and 2,968,546 Common Shares issuable upon exercise of outstanding
stock options and 712,013 Common Shares issuable upon the vesting of RSUs. Taking into account the total number of warrants and
principal amount of the notes remaining outstanding and assuming full exercise of the outstanding warrants and conversion of the
notes and accrued interest to December 31, 2020, the maximum number of Common Shares issuable would be 18,637,745 representing
approximately 64% of Neovasc’s current issued and outstanding number of Common Shares.
The Common Shares all have
equal voting rights and are entitled to receive notice of any shareholders meeting at which they have the right to vote. Subject
to the rights of any other class of shares, upon any liquidation, dissolution, winding-up or other distribution of the Company’s
assets, the holders of Common Shares are entitled to participate equally.
The Company is also authorized
to issue an unlimited number of preferred shares, which do not have voting rights and are not entitled to receive notice of any
shareholders’ meetings. Upon liquidation, dissolution, winding-up or other distribution of the Company’s assets, the
holders of preferred shares are entitled to participate in priority to the holders of Common Shares. The preferred shares may be
issued in series and the Company’s board of directors may attach special rights, privileges, restrictions or conditions to
any preferred shares. There were no preferred shares issued and outstanding as of the date of this prospectus supplement.
Dividend Policy
We have not paid any dividends
to date on our Common Shares. We do not currently expect to pay any dividends on our Common Shares for the foreseeable future.
Preferred Shares
We may issue our preferred
shares from time to time in one or more series. The terms of each series of preferred shares, including the number of shares, the
designation, rights, preferences, privileges, priorities, restrictions, conditions and limitations, will be determined at the time
of creation of each such series by our board of directors, without shareholder approval, provided that all preferred shares will
rank equally within their class as to dividends and distributions in the event of our dissolution, liquidation or winding-up.
DESCRIPTION OF EXISTING SECURITIES
2020 Notes
The 2020 Notes were
issued in the aggregate principal amount of US$4,000,000 on May 28, 2020 pursuant to the securities purchase agreement
(the “SPA”) dated May 26, 2020. 2,573,959 May 2020 Warrants were also issued on May 28,
2020 pursuant to the SPA. An additional US$1,000,000 in principal amount of 2020 Notes was issued on June 3, 2020. The
2020 Notes will bear interest at the rate of 8% computed on the basis of a 360-day year and twelve 30-day months and shall be
payable in additional 2020 Notes on the date that is six-months after issuance and on each six-month period thereafter up to,
and including, the maturity date. The 2020 Notes will have a maturity date of 48-months after issuance with a holder’s
option for early redemption at 24-months. The 2020 Notes are to be issued at par and shall rank in senior priority to all
other current and future debentures of the Company. The 2020 Notes shall also include blocking rights to all future proposed
debentures of equal or senior priority to the 2020 Notes. Each 2020 Note will be convertible at the option of the holder of
the 2020 Note into Common Shares (the “Conversion Shares”) at a conversion price of US$2.81525 per
Conversion Share.
Upon an event of default, the interest rate shall automatically be increased by 3% percent per annum. The
2020 Notes are senior to all other indebtedness and secured by all assets. The terms of the 2020 Notes prohibit a holder from
converting its 2020 Notes if doing so would result in such holder (together with any person acting jointly or in concert with
the holder, including such holder’s affiliates) beneficially owning, or exercising control or direction over more than
9.99% of the number of Common Share outstanding immediately after giving effect to the conversion, as such percentage
ownership is determined in accordance with the terms of the 2020 Notes. The Company shall not issue any fraction of a share
issued upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Shares, the
Company shall round such fraction of a share of Common Shares down to the nearest whole share.
The 2020 Note holders are
entitled to participate in any dividends or other distributions by the Company and the sale, by the Company, of any options, convertible
securities or rights to purchase stock, warrants, securities or other property pro rata to the holders of Common Shares as if they
had converted their 2020 Notes and were holders of the Conversion Shares. The Company shall not enter into or be party to a Fundamental
Transaction (as defined in the 2020 Note) unless the successor entity assumes in writing all of the obligations of the Company
under the 2020 Note and it delivers to each holder of 2020 Notes in exchange for such 2020 Notes a security of the successor entity
evidenced by a written instrument substantially similar in form and substance to the 2020 Notes. Under the 2020 Notes, an event
of default triggers a redemption right.
The 2020 Notes contain
certain covenants, which include: limitations on restricted payments, restrictions on asset transfers (other than ordinary course
of business), and restrictions on cash burn. The 2020 Notes and any Common Shares issued upon conversion of the 2020 Note may be
offered, sold, assigned or transferred by the holder without the consent of the Company.
Upon a change of control
the holder may require the Company to redeem the 2020 Note at a price equal to 125% of the principal amount of the note, decreasing
by 10% on each anniversary of the issuance of the 2020 Note to a price of 100% from the third anniversary of the issuance of the
2020 Note until maturity. Any amendment to the terms of the 2020 Note shall require the consent of the Company and the Required
Holders (as defined in the 2020 Note), provided that that such limitation shall not apply upon the prior written consent of each
such holder of the 2020 Notes in the event such holder would be treated adversely and disproportionally by such an amendment.
Particulars concerning
the Conversion Shares and May 2020 Warrant Shares are set out under "Description of Share Capital– Common Shares".
May 2020 Warrants
The May 2020 Warrants
are exercisable at any time from four years after the date of issuance. The May 2020 Warrants will be exercisable, at the
option of each holder. No fractional May 2020 Warrant Shares will be issued in connection with the exercise of a May 2020
Warrant. Any entitlement to May 2020 Warrant Shares shall be rounded down to the nearest whole May 2020 Warrant Share.
The holder will not have the right to exercise any portion of the May 2020 Warrant if the holder (together with any acting
jointly or in concert with it, including its affiliates) would beneficially own or exercise control or direction over 9.99% of
the number of our Common Shares outstanding immediately after giving effect to the exercise, as such percentage ownership is determined
in accordance with the terms of the May 2020 Warrants. Each May 2020 Warrant represents the right to purchase one May 2020
Warrant Share at an exercise price equal to US$2.634 per May 2020 Warrant Share, subject to adjustment. The exercise price
is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting our Common Shares.
If, at the time a holder
exercises its May 2020 Warrant, there is no effective registration statement covering the issuance of the shares underlying
the May 2020 Warrant to the holder, then in lieu of making the cash payment otherwise contemplated to be made to us upon such
exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole
or in part) the net number of Common Shares determined according to a formula set forth in the May 2020 Warrant. The May 2020
Warrant holders are entitled to participate in any dividends or other distributions by the Company and the sale, by the Company,
of any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the shareholders
of the Common Shares as if they had exercised their May 2020 Warrant and were holders of the May 2020 Warrant Shares.
In the event of a Fundamental Transaction and at the request of the holder of the May 2020 Warrant, the Company must purchase
the May 2020 Warrant from such holder on the date of such request by paying to the holder cash in an amount equal to the value
of the unexercised May 2020 Warrants according to the Black Scholes Option Pricing Model.
As of the date of this prospectus there
are 648,910 May 2020 Warrants outstanding.
Particulars concerning
the May 2020 Warrant Shares are set out under "Description of Share Capital– Common Shares".
2019
Note
Pursuant to the May 2019
Financing, a secured convertible debenture (the “2019 Notes”) was issued at a 15% original issue discount with
a face value of US$11,500,000, for gross proceeds to the Company of US$9,775,000. The 2019 Note is secured by a general security
agreement dated as of May 16, 2019 granted by the Company and its subsidiaries to and in favour of SMG over all of the Company’s
present and after-acquired personal property, which includes all of its assets in the U.S., Canada and Israel related to Tiara
and Reducer. Following the Prepayment on July 23, 2020 of US$3,613,341 and on August 17, 2020 of US$1,263,885, the 2019
Note now carries a face value of US$6,622,774, excluding accrued interest. The 2019 Note matures on May 16, 2023 and has the
following key terms:
• For
the first year after its issuance, interest accrues at a rate of 8%, of which 5% is payable in cash on or about May 17, 2020.
The remainder is deferred and will be due on maturity of the 2019 Note.
• After
the first year and until maturity, interest accrues at a rate of 10%, of which 7% is payable in cash at the end of May and
November each year. The remainder is deferred and will be due on maturity of the 2019 Note.
• The
2019 Note was issued at an original discount of US$1.725 million. A separate subscription for Common Shares by the holder of the
2019 Note was made for this amount (at market price) concurrent with the issuance of the 2019 Note.
• The
Company has a prepayment option whereby it may voluntarily prepay the 2019 Note prior to maturity. Prepayment penalties of 3% (if
prepaid prior to the 1st anniversary of issuance), 2% (if prepaid between the first and second anniversaries of issuance) and 1%
(if prepaid after the second anniversary) apply.
• The
2019 Note is convertible into Common Shares at the option of the holder (however, the holder may not own in excess of 19.99% of
the total outstanding Common Shares of the Company as a result of the conversion). The conversion price is US$7.50 per common share
prior to the second anniversary of issuance, US$8.50 between the second and third anniversaries of issuance and US$9.70 after the
third anniversary of issuance. The conversion price would also be proportionally adjusted upon any common share reorganization
events, including stock dividends, distributions, stock splits or reverse-stock splits.
2019 Broker Warrants
In
connection with the February 2019 Financing and the March 2019 Financing, the Company issued 144,444 2019 Broker
Warrants. The 2019 Broker Warrants are exercisable at a price
per Common Share equal toUS$5.625 for a period of three years following issuance. Pursuant to FINRA Rule 5110(g), the 2019
Broker Warrants and any common shares issued upon the exercise of the underwriter warrants shall not be sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short sale, derivate, put or call transaction that would result in
the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness
of, or commencement of sales under, the February 2019 Financing and the March 2019 Financing, except the transfer of
any security: (i) by operation of law or by reason of our reorganization; (ii) to any FINRA member firm participating
in the February 2019 Financing and the March 2019 Financing and the officers or partners thereof, if all securities so
transferred remain subject to their respective lock-up restrictions for the remainder of the time period; (iii) if the aggregate
amount of our securities held by the holder of such securities or related persons does not exceed 1% of the securities offered
in the February 2019 Financing, in respect of the February 2019 Broker Warrants, or the March 2019 Financing, in
respect of the March 2019 Broker Warrants; (iv) that is beneficially owned on a pro-rata basis by all equity owners of
an investment fund, provided that no participating member manages or otherwise directs investments by the fund and the participating
members in the aggregate do not own more than 10% of the equity in the fund; or (v) issued upon the exercise or conversion
of any security, if all securities remain subject to the lock-up restriction set forth below for the remainder of the time period.
January 2020 Warrants
In connection with the January 2020
Financing, the Company issued 1,185,000 Series A Units and 1,241,490 Series B Units at a price of US$4.1351 per Series A
Unit and US$4.135 per Series B Unit. Each Series A Unit is comprised of (i) one Common Share and (ii) one common
share purchase warrant (each, a “January 2020 Warrant”) Each Series B Unit is comprised of (i) one
Pre-Funded January Warrant (as defined below) and (ii) one January 2020 Warrant.
The 2020 Warrants entitle the holder to
acquire, subject to certain adjustments, one Common Share at an exercise price of US$4.1351 per share on or prior to 5:00 p.m. (New
York time) on January 6, 2024. The January 2020 Warrants will be exercisable, at the option of each holder, in whole
or in part, by delivering to the Company a duly executed notice of exercise, thereby canceling all or a portion of the January 2020
Warrant Holder’s January 2020 Warrants. The January 2020 Warrants may be exercised on a ‘‘net’’
or ‘‘cashless’’ basis to the extent that the Company does not have an effective registration statement
registering (or the related prospectus is not available) the shares issuable upon exercise of the January 2020 Warrants.
In connection with certain specified mergers,
sales, business combinations, recapitalizations or similar events (a ‘‘Fundamental Transaction’’),
holders of the January 2020 Warrants will have the right to receive, upon exercise, the same consideration as holders of Common
Shares in respect of the Common Shares that would be issuable upon exercise of the January 2020 Warrants immediately prior
to such Fundamental Transaction, in addition to any additional consideration receivable by holders of Common Shares in connection
with such Fundamental Transaction.
Holders of the January 2020 Warrants
will also have the option, within 30 days of the closing of a Fundamental Transaction, to require the Company (or its successor)
to repurchase their January 2020 Warrants in cash or, if the Fundamental Transaction is not in the Company’s control,
in the consideration received by other holders of Common Shares in respect of such Fundamental Transaction, at a value determined
by using the Black-Scholes option pricing model.
As of the date of this prospectus there
are 250,000 January 2020 Warrants outstanding.
January 2020 Broker
Warrants
In connection with the
January 2020 Financing, the Company issued common share purchase warrants (the “2020 Broker
Warrants”) to purchase up to 157,721 Common Shares at an exercise price of US$5.1689 per Common Share to the
underwriter in the January 2020 Financing. The 2020 Broker Warrants are exercisable immediately and for three years from
their dates of issuance. Pursuant to FINRA Rule 5110(g), the 2020 Broker Warrants and any common shares issued upon the
exercise of the 2020 Broker Warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of
any hedging, short sale, derivate, put or call transaction that would result in the effective economic disposition of the
securities by any person for a period of 180 days immediately following the date of effectiveness of, or commencement of
sales under, the relevant January 2020 Financing pursuant to which such 2020 Broker Warrants were issued, except the
transfer of any security: (i) by operation of law or by reason of our reorganization; (ii) to any FINRA member firm
participating in such 2019 Financing and the officers or partners thereof, if all securities so transferred remain subject to
the Lock up restriction set forth below for the remainder of the time period; (iii) if the aggregate amount of our
securities held by the underwriter in the relevant January 2020 Financing or related persons does not exceed 1% of the
securities being offered in the relevant January 2020 Financing; (iv) that is beneficially owned on a pro rata
basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs
investments by the fund and the participating members in the aggregate do not own more than 10% of the equity in the fund; or
(v) issued upon the exercise or conversion of any security, if all securities remain subject to the lock up restriction
set forth below for the remainder of the time period.
Settlement Warrants
In connection with the settlement agreement
between the Company and certain investors (the “Settlors”) on May 26, 2020 (the “Settlement Agreement”),
the Company issued Settlement Warrants to purchase up to 500,000 Common Shares (the “Settlement Warrant Shares”).
The Settlement Warrants were issued to the Settlors pursuant to the Settlement Agreement, whereby the Settlors and the Company
have agreed to a mutual release and certain rights and obligations as further set forth in the Settlement Agreement. The Settlement
Warrants are exercisable beginning on the date of issuance, and at any time prior to 11:59 p.m. (New York time) on the date
that is four years after the date of issuance. The Settlement Warrants will be exercisable, at the option of each holder, in whole
or in part, by delivering to us a duly executed exercise notice, thereby canceling all or a portion of the Settlement Warrant.
No fractional Settlement Warrant Shares will be issued in connection with the exercise of a Settlement Warrant. Any entitlement
to Settlement Warrant Shares shall be rounded down to the nearest whole Settlement Warrant Share. The holder will not have the
right to exercise any portion of the Settlement Warrant if the holder (together with its affiliates and any other persons acting
as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 9.99% of the number
of our Common Shares outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in
accordance with the terms of the Settlement Warrants. Each Settlement Warrant represents the right to purchase one Settlement Warrant
Share at an exercise price equal to US$2.634 per Settlement Warrant Share, subject to adjustment. The exercise price is subject
to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications
or similar events affecting our Common Shares. If the Company issues, sells, or is deemed to have issued or sold, any Common Shares
for less than the exercise price of the Settlement Warrants, the exercise price of the Settlement Warrants will be reduced to an
amount equal to a price determined in accordance with the dilutive issuance formula set out in the Settlement Warrant.
If, at the time a holder exercises
its Settlement Warrant, there is no effective registration statement covering the issuance of the shares underlying the
Settlement Warrant to the holder, then in lieu of making the cash payment otherwise contemplated to be made to us upon such
exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in
whole or in part) the net number of Common Shares determined according to a formula set forth in the Settlement Warrant. The
Settlement Warrant holders are entitled to participate in any dividends or other distributions by the Company and the sale,
by the Company, of any options, convertible securities or rights to purchase stock, warrants, securities or other property
pro rata to the shareholders of the Common Shares as if they had exercised their Settlement Warrant and were holders of the
Settlement Warrant Shares. In the event of a Fundamental Transaction and at the request of the holder of the Settlement
Warrant, the Company must purchase the Settlement Warrant from such holder on the date of such request by paying to the
holder cash in an amount equal to the value of the unexercised Settlement Warrants according to the Black Scholes Option
Pricing Model.
The Settlement Agreement imposes the restrictions
on the Settlement Warrants and Settlement Warrant Shares set forth below:
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1.
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Until August 12, 2020, the holder may not sell
any of the Settlement Warrant Shares unless the aggregate market value of the Company’s
public float of its outstanding equity shares is at least US$75 million (as determined pursuant to Item I.C. of the General Instructions
to Form F-10) for at least one full trading day prior to such date;
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2.
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Until August 19, 2020, the holder may not sell
any of the Settlement Warrant Shares unless the Company’s market value of its listed
securities is at least US$35 million (as determined pursuant to Nasdaq Listing Rule 5810) (the “MLVS Requirement”)
or the Company has received written confirmation from Nasdaq that the Company has regained compliance with the MVLS Requirement;
and
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3.
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The holder may not, on any trading day, sell such amount of Settlement Warrant Shares that would
exceed 10% of the total trading volume of the Company’s Common Shares on the immediately preceding trading day.
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Particulars
concerning the Settlement Warrant Shares are set out under "Description of Share Capital–
Common Shares".
June 2020 Warrants
In connection with the
June offering, the Company issued 2,912,277 common share purchase warrants (the “June 2020 Warrants”)
in certificated form. Each whole June 2020 Warrant entitles the holder to acquire, subject to adjustment as summarized below,
one Common Share at an exercise price of US$2.88 per share on or prior to 5:00 p.m. (New York time) on the fifth year following
issuance of the June 2020 Warrants, after which time the June 2020 Warrant will be void and of no value. The Warrants
are exercisable, at the option of each holder, in whole or in part, by delivering to the Company a duly executed notice of exercise,
thereby canceling all or a portion of such holder’s June 2020 Warrants. The June 2020 Warrants may be exercised
on a “net” or “cashless” basis to the extent that the Company does not have an effective registration statement
registering (or the related prospectus is not available) the shares issuable upon exercise of the June 2020 Warrants
The form of certificate
for the June 2020 Warrants (the “Warrant Certificate”) provide that the number of underlying shares and
exercise price of the June 2020 Warrants are subject to adjustment in the event of certain share dividends or distributions
or of a subdivision or consolidation of the Common Shares or similar events.
The Warrant Certificate
also provide that, during the period in which the Warrants are exercisable, it will give notice to holders of June 2020 Warrants
of certain stated events, at least 20 days prior to the record date or effective date, as the case may be, of such events.
In connection with a
Fundamental Transaction, holders of the June 2020 Warrants have the right to receive, upon exercise, the same
consideration as holders of Common Shares in respect of the Common Shares that would be issuable upon exercise of the
June 2020 Warrants immediately prior to such Fundamental Transaction, in addition to any additional consideration
receivable by holders of Common Shares in connection with such Fundamental Transaction. Holders of the June 2020
Warrants also have the option, within 30 days of the closing of a Fundamental Transaction, to require the Company (or its
successor) to repurchase their June 2020 Warrants in cash or, if the Fundamental Transaction is not in the
Company’s control, in the consideration received by other holders of Common Shares in respect of such Fundamental
Transaction, at a value determined by using the Black-Scholes option pricing model.
The Warrant Certificate
also contain restrictions on the number of Common Shares that may be acquired by a holder of June 2020 Warrants upon any exercise
of the June 2020 Warrants that would result in the holder and its affiliates holding in excess of 4.99% (or, at the election
of the holder, 9.99%) of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares
upon exercise of such June 2020 Warrants, which beneficial ownership limitation may be increased or decreased up to 9.99%
upon notice to us, provided that any increase in the beneficial ownership limitation shall not be effective until 61 days following
notice to us. No fractional Common Shares is issuable upon the exercise of any June 2020 Warrants. Holders of June 2020
Warrants will not have any voting or pre-emptive rights or any other rights which a holder of Common Shares would have, except
as set forth in the June 2020 Warrants.
June 2020 Broker
Warrants
In connection with the
June Offering, the Company issued 252,397 common share purchase warrants (the “June 2020 Broker Warrants”)
at an exercise price of US$3.71719 per Common Share (equal to 125% of the public offering price for the June Units sold in
this June Offering). The June 2020 Broker Warrants are exercisable immediately for a period of 5 years from June 12,
2020 and are in the same form as the June 2020 Warrants issued to the investors, except as otherwise required by FINRA. Pursuant
to FINRA Rule 5110(g), the June 2020 Broker Warrants and any common shares issued upon the exercise of the June 2020
Broker Warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale,
derivate, put or call transaction that would result in the effective economic disposition of the securities by any person for a
period of 180 days immediately following the date of effectiveness of, or commencement of sales under, the June Offering,
except the transfer of any security: (i) by operation of law or by reason of our reorganization; (ii) to any FINRA member
firm participating in the June Offering and the officers or partners thereof, if all securities so transferred remain subject
to this lock-up restriction for the remainder of the time period; (iii) if the aggregate amount of our securities held by
the placement agent or related persons does not exceed 1% of the securities being offered in the June Offering; (iv) that
is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages
or otherwise directs investments by the fund and the participating members in the aggregate do not own more than 10% of the equity
in the fund; or (v) issued upon the exercise or conversion of any security, if all securities remain subject to this lock-up
restriction for the remainder of the time period.
July 2020 Prepayment
Warrants
In connection with the
Prepayment, the Company issued 481,778 July Prepayment Warrants with an exercise price equal to US$7.50 per Common Share for
any such exercise prior to the second anniversary of the original closing date of May 16, 2019 (the “Closing Date”),
US$8.50 per Common Share for any such exercise on or after the second anniversary of the Closing Date but prior to the third anniversary
of the Closing Date, and US$9.70 per Common Share on or after the third anniversary of the Closing Date per Common Share until
4:30 p.m. (Vancouver Time) on May 16, 2023. The exercise price is subject to appropriate adjustment in the event of certain
capital reorganization events including a reclassification of the Company’s Common Shares, a change in the Company’s
Common Shares into other shares or securities, a subdivision or consolidation of the Company’s Common Shares.
August 2020 Warrants
In connection with
the August Offering, the Company issued 3,399,579 common share purchase warrants (the “August 2020
Warrants”) in certificated form. Each whole August 2020 Warrant entitles the holder to acquire, subject to
adjustment as summarized below, one Common Share at an exercise price of US$2.69 per share on or prior to 5:00 p.m. (New
York time) on the fifth year following issuance of the August 2020 Warrants, after which time the August 2020
Warrant will be void and of no value. The August 2020 Warrants are in the same form as the June 2020 Warrants.
August 2020 Broker
Warrants
In connection with the
August Offering, the Company issued 294,630 common share purchase warrants (the “August 2020 Broker Warrants”)
at an exercise price of US$3.46969 per Common Share (equal to 125% of the public offering price for the August Units sold
in this August Offering). The August 2020 Broker Warrants are exercisable immediately for a period of 5 years from August 12,
2020 and are in the same form as the August 2020 Warrants issued to the investors, except as otherwise required by FINRA.
Pursuant to FINRA Rule 5110(g), the August 2020 Broker Warrants and any common shares issued upon the exercise of the
August 2020 Broker Warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging,
short sale, derivate, put or call transaction that would result in the effective economic disposition of the securities by any
person for a period of 180 days immediately following the date of effectiveness of, or commencement of sales under, the August Offering,
except the transfer of any security: (i) by operation of law or by reason of our reorganization; (ii) to any FINRA member
firm participating in the August Offering and the officers or partners thereof, if all securities so transferred remain subject
to this lock-up restriction for the remainder of the time period; (iii) if the aggregate amount of our securities held by
the placement agent or related persons does not exceed 1% of the securities being offered in the August Offering; (iv) that
is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages
or otherwise directs investments by the fund and the participating members in the aggregate do not own more than 10% of the equity
in the fund; or (v) issued upon the exercise or conversion of any security, if all securities remain subject to this lock-up
restriction for the remainder of the time period.
August 2020 Prepayment
Warrants
In connection with the
Prepayment, the Company issued 168,518 August Prepayment Warrants with an exercise price equal to US$7.50 per Common Share
for any such exercise prior to the second anniversary of the original closing date of May 16, 2019 (the “Closing
Date”), US$8.50 per Common Share for any such exercise on or after the second anniversary of the Closing Date but prior
to the third anniversary of the Closing Date, and US$9.70 per Common Share on or after the third anniversary of the Closing Date
per Common Share until 4:30 p.m. (Vancouver Time) on May 16, 2023. The exercise price is subject to appropriate adjustment
in the event of certain capital reorganization events including a reclassification of the Company’s Common Shares, a change
in the Company’s Common Shares into other shares or securities, a subdivision or consolidation of the Company’s Common
Shares.
December Warrants
In connection with the
December Offering, the Company issued 6,230,803 common share purchase warrants (the “December Warrants”)
in certificated form. Each whole December Warrant entitles the holder to acquire, subject to adjustment as summarized below,
one Common Share at an exercise price of US$0.856 per share on or prior to 5:00 p.m. (New York time) on the 66 months following
issuance of the December Warrants, after which time the December Warrant will be void and of no value. The December Warrants
are in the same form as the June 2020 Warrants.
December Compensation
Warrants
In connection with
the December Offering, the Company issued 405,002 common share purchase warrants (the
“December Compensation Warrants”) at an exercise price of US$1.225125 per Common Share (equal to 125%
of the public offering price for the December Units sold in this December Offering). The December Compensation
Warrants are exercisable immediately for a period of 5 years from December 8, 2020 and are in the same form as the
December Warrants issued to the investors, except as otherwise required by FINRA. Pursuant to FINRA Rule 5110(g),
the December Compensation Warrants and any common shares issued upon the exercise of the December Compensation
Warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale,
derivate, put or call transaction that would result in the effective economic disposition of the securities by any person for
a period of 180 days immediately following the date of effectiveness of, or commencement of sales under, the
December Offering, except the transfer of any security: (i) by operation of law or by reason of our reorganization;
(ii) to any FINRA member firm participating in the December Offering and the officers or partners thereof, if all
securities so transferred remain subject to this lock-up restriction for the remainder of the time period; (iii) if the
aggregate amount of our securities held by the placement agent or related persons does not exceed 1% of the securities being
offered in the December Offering; (iv) that is beneficially owned on a pro-rata basis by all equity owners of an
investment fund, provided that no participating member manages or otherwise directs investments by the fund and the
participating members in the aggregate do not own more than 10% of the equity in the fund; or (v) issued upon the
exercise or conversion of any security, if all securities remain subject to this lock-up restriction for the remainder of the
time period.
CONSOLIDATED CAPITALIZATION
Since September 30,
2020, the date of our financial statements for the most recently completed financial period, there have been no material changes
in our consolidated share and loan capital other than as outlined under “Prior Sales”. For information on the
issuance of shares pursuant to the exercise of options pursuant to our incentive stock option plan, the issuance of shares pursuant
to the vesting of restricted share units pursuant to our restricted share unit plan and warrants, see “Prior Sales”.
PLAN OF DISTRIBUTION
This prospectus supplement relates to the
issuance, from time to time, during the 25-month period that the accompanying prospectus supplement, including any amendments thereto,
remains valid, of up to 6,230,803 Common Shares of the Company upon exercise of the December Warrants. Such Common Shares
are issuable until the respective expiry dates of the December Warrants, in accordance with their terms, as described in the
section “Description of Existing Securities”.
On December 8, 2020, the Company filed
a prospectus supplement to our short form base shelf prospectus dated August 12, 2020 with the securities commission or similar
regulatory authority in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario relating to the December Offering.
In connection with the December Offering, the Company entered into an engagement agreement dated December 8, 2020 with
H.C. Wainwright & Co., LLC (the “Placement Agent”) pursuant to which the Placement Agent agreed to
arrange for the sale of 6,230,803 December Units at a price of US$0.9801 per December Unit for aggregate gross proceeds
of US$6,106,810, less the placement agent’s commission and management fee, payable in cash to the Company against delivery.
This prospectus supplement registers the
issuance of the Common Shares upon exercise of the December Warrants under the U.S. Securities Act, in accordance with the
multi-jurisdictional disclosure system adopted by the SEC and the securities commission or similar regulatory authority in each
of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. This prospectus supplement does not qualify
in any of the provinces or territories of Canada the distribution of the securities to which it relates.
The Common Shares to which this prospectus
supplement relates will be sold directly by the Company to the holders of December Warrants on the exercise of such December Warrants.
No underwriter, dealer or agent will be involved in these sales.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain
U.S. federal income tax considerations generally applicable to a “U.S. Holder” of the ownership and disposition
of the Common Shares acquired pursuant to this Offering. This summary addresses only holders who acquire and hold the Common
Shares as capital assets (generally, property held for investment purposes). This summary does not address all potentially
relevant U.S. federal income tax matters, and unless otherwise specifically provided, it does not address any state, local,
foreign, alternative minimum, unearned income “Medicare” contribution, estate or gift tax consequences of holding
or disposing of Common Shares.
As used herein, the term “U.S. Holder”
means any beneficial owner of Common Shares who, for U.S. federal income tax purposes, is: (i) a citizen or individual resident
of the United States; (ii) a corporation (or other entity classified as a corporation for U.S. federal tax purposes) organized
under the laws of the United States or of any state thereof or the District of Columbia, (iii) an estate whose income is subject
to U.S. federal income taxation regardless of its source, and (iv) a trust (A) if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions
of the trust, or (B) that has elected to be treated as a U.S. person under applicable U.S. Treasury Regulations.
If a partnership (or other entity or arrangement
treated as a partnership for U.S. federal tax purposes) holds Common Shares, the tax treatment of a partner will generally depend
upon the status of the partner and the activities of the partnership. Partnerships (or other entities or arrangements classified
as a partnership for U.S. federal tax purposes) holding Common Shares and their partners and other owners are urged to consult
their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them.
This summary is based on the Canada United
States Income Tax Convention (1980), as amended, the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
administrative pronouncements and rulings of the IRS, judicial decisions and existing and proposed U.S. Treasury Regulations, changes
to any of which subsequent to the date of this prospectus supplement may affect the tax consequences described herein, possibly
on a retroactive basis. This summary is for general guidance only and does not address the consequences applicable to certain categories
of shareholders subject to special treatment under the Code, including tax exempt organizations, pass through entities, certain
financial institutions, insurance companies, qualified retirement plans, individual retirement accounts or other tax deferred accounts,
persons that hold Common Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale or other
arrangement involving more than one position, persons that acquired Common Shares in connection with the exercise of employee stock
options or otherwise as compensation for services, dealers in securities or foreign currencies, traders in securities that elect
to use a mark to market method of accounting, U.S. persons whose functional currency (as defined in the Code) is not the U.S. dollar,
former citizens or permanent residents of the United States, or persons that own directly, indirectly or constructively 10% or
more of our Common Shares by voting power or by value. Holders and prospective investors are urged to consult their own tax advisors
with regard to the application of the income tax laws of the United States and any other taxing jurisdiction to their particular
circumstances.
Prospective investors are urged to consult
their own tax advisors with respect to the tax considerations relevant to them, having regard to their own particular circumstances.
Distributions with respect to the
Common Shares
Subject to the PFIC rules discussed
below, a U.S. Holder will generally recognize, to the extent out of our current and accumulated earnings and profits (determined
in accordance with U.S. federal income tax principles), dividend income on the receipt of distributions on the Common Shares (including
amounts withheld to pay any Canadian withholding taxes). We do not intend to calculate our earnings and profits under U.S. federal
income tax rules. Accordingly, U.S. Holders should expect that a distribution will generally be treated as a dividend for U.S.
federal income tax purposes.
The amount of any dividend paid to a U.S.
Holder in Canadian dollars (including amounts withheld to pay Canadian withholding taxes) will be includible in income in a U.S.
dollar value amount by reference to the exchange rate between the U.S. dollar and the Canadian dollar in effect on the date of
receipt of such dividend by the U.S. Holder, regardless of whether the Canadian dollars so received are in fact converted into
U.S. dollars. A U.S. Holder will have a tax basis in the Canadian dollars equal to their U.S. dollar value on the date of receipt.
If the Canadian dollars received are converted into U.S. dollars on the date of receipt, the U.S. Holder should generally not be
required to recognize foreign currency gain or loss in respect of the dividend. If the Canadian dollars received are not converted
into U.S. dollars on the date of receipt, a U.S. Holder may recognize foreign currency gain or loss on a subsequent conversion
or other disposition of the Canadian dollars. Such gain or loss will generally be treated as U.S. source ordinary income or loss.
We believe that we are a “qualified
foreign corporation” and therefore, distributions treated as dividends and received by certain non-corporate U.S. Holders
will be taxed at preferential rates, provided applicable holding period and certain other requirements are satisfied, including
that we are not treated as a PFIC for the year of the distribution or for the prior taxable year. Any amount of such distributions
treated as dividends will generally not be eligible for the “dividends received” deduction ordinarily available to
certain U.S. corporate shareholders.
Distributions on Common Shares that are
treated as dividends will generally constitute income from sources outside the United States and will generally be categorized
for U.S. foreign tax credit purposes as “passive category income.” A U.S. Holder may be eligible to elect to claim
a U.S. foreign tax credit against its U.S. federal income tax liability, subject to applicable limitations and holding period requirements,
for Canadian tax withheld, if any, from distributions received in respect of Common Shares. A U.S. Holder that does not elect to
claim a U.S. foreign tax credit may instead claim a deduction for Canadian tax withheld, but only for a taxable year in which the
U.S. Holder elects to do so with respect to all non-U.S. income taxes paid or accrued in such taxable year. The rules relating
to U.S. foreign tax credits are complex, and each U.S. Holder should consult its own tax adviser regarding the application of such
rules.
Sale, Exchange or Other Taxable Disposition
of the Common Shares
Subject to the PFIC rules discussed
below, upon a sale, exchange or other taxable disposition of a Share, a U.S. Holder will generally recognize a capital gain or
loss equal to the difference between the amount realized on such sale, exchange or other taxable disposition (or, if the amount
realized is denominated in Canadian dollars, its U.S. dollar equivalent, generally, for U.S. Holders that use the cash method and
for electing U.S. Holders that use accrual method, determined by reference to the spot rate of exchange on the date of settlement)
and the holder’s tax basis of such Share. Such gain or loss will be a long-term capital gain or loss if the Share has been
held for more than one year and will be short term capital gain or loss if the holding period is equal to or less than one year.
Such gain or loss will generally be considered U.S. source gain or loss for U.S. foreign tax credit purposes. Long term capital
gains of non-corporate taxpayers are eligible for reduced rates of taxation. The deductibility of capital losses is subject to
limitations.
Passive Foreign Investment Company
Rules
A foreign corporation will be
considered a PFIC for any taxable year in which (i) 75% or more of its gross income is “passive income” or
(ii) 50% or more of the average quarterly value of its assets produce (or are held for the production of) “passive
income.” For this purpose, “passive income” generally includes interest, dividends, rents, royalties and
certain gains. We currently do not believe that we were a PFIC in the preceding taxable year nor do we anticipate that we
will be a PFIC in the current taxable year or in future taxable years, although this determination is subject to substantial
uncertainty. The determination as to whether we are a PFIC for any taxable year is based on the application of complex U.S.
federal income tax rules, which are subject to differing interpretations, and is not determinable until after the end of such
taxable year. Further, the determination is based in part on the mix, use and value of our assets, which values may be
treated as changing for U.S. federal income tax purposes as our market capitalization changes. Because of the above-described
uncertainties, there can be no assurance that the IRS will not challenge the determination made by us concerning our PFIC
status or that we will not be a PFIC for any taxable year. If we were classified as a PFIC in any taxable year during which a
U.S. Holder owns our Common Shares, certain adverse tax consequences could apply to such U.S. Holder. Certain elections may
be available to U.S. Holders of Common Shares that may mitigate some of the adverse consequences resulting from our treatment
as a PFIC. U.S. Holders should consult their own tax advisors regarding the application of the PFIC rules to their
investments in Common Shares and whether to make an election or protective election.
Required Disclosure with Respect
to Foreign Financial Assets
Certain U.S. Holders are required to report
information relating to an interest in Common Shares, subject to exceptions (including an exception for Common Shares held in accounts
maintained by certain financial institutions), by attaching a completed IRS Form 8938, Statement of Specified Foreign Financial
Assets, with their tax return for each year in which they hold an interest in Common Shares. U.S. Holders should consult their
own tax advisors regarding information reporting requirements relating to their ownership of Common Shares.
THE ABOVE SUMMARY IS NOT INTENDED TO
CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP AND DISPOSITION
OF COMMON SHARES. U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR
OWN PARTICULAR CIRCUMSTANCES.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
Non-Residents of
Canada
The following is a summary,
as of the date of this prospectus supplement, of the principal Canadian federal income tax considerations under the Income Tax
Act (Canada) (“Tax Act”) that generally apply to an investor who acquired a Common Share on exercise of
a December Warrant who, for the purposes of the Tax Act and at all relevant times, deals at arm’s length, and is not
affiliated with the Company and who acquires and holds the Common Shares as capital property (a “Holder”). Generally,
a security issued hereunder will be considered to be capital property to a Holder provided that the Holder does not use such security
in the course of carrying on a business of trading or dealing in securities and such Holder has not acquired them or been deemed
to have acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.
This summary is based upon
the current provisions of the Tax Act and its regulations and the current published administrative policies and assessing practices
of the Canada Revenue Agency (the “CRA”). This summary takes into account all specific proposals to amend the
Tax Act and its regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the
“Tax Proposals”) and assumes that the Tax Proposals will be enacted in the form proposed, although no assurance
can be given that the Tax Proposals will be enacted in their current form or at all. This summary does not otherwise take into
account any changes in law or in the administrative policies or assessing practices of the CRA, whether by legislative, governmental
or judicial decision or action, nor does it take into account or consider any provincial, territorial or foreign income tax considerations,
which considerations may differ significantly from the Canadian federal income tax considerations discussed in this summary.
This summary only applies
to Holders who (i) for the purposes of the Tax Act, have not and will not be resident in Canada at any time, and (ii) do
not use or hold the common shares in carrying on a business in Canada. Special rules, which are not discussed in this summary,
may apply to a Holder that is an insurer that carries on business in Canada and elsewhere.
This summary is of a general
nature only, is not exhaustive of all possible Canadian federal income tax considerations and is not intended to be, nor should
it be construed to be, legal or tax advice to any particular Holder. Holders should consult their own tax advisors with respect
to their particular circumstances.
Currency
For purposes of the Tax
Act, all amounts relating to the acquisition, holding or disposition of Common Shares must be expressed in Canadian dollars. Amounts
denominated in any other currency must be converted into Canadian dollars using the rate of exchange quoted by the Bank of Canada
on the day the amount first arose, or such other rate of exchange as is acceptable to the CRA.
Taxation of Common Shares
Taxation of Dividends
Subject to an applicable
tax treaty or convention, a dividend paid or credited, or deemed to be paid or credited, to a Holder on the Common Shares will
be subject to Canadian withholding tax under the Tax Act at the rate of 25% of the gross amount of the dividend. Such rate is generally
reduced under the Canada-United States Tax Convention (1980) (the “Treaty”) to 15% if the beneficial
owner of such dividend is a resident in the U.S. for purposes of the Treaty and fully entitled to benefits under the Treaty (a
“U.S. Holder”). The rate of withholding tax is further reduced to 5% if the beneficial owner of such dividend
is a U.S. Holder that is a company that owns, directly or indirectly, at least 10% of the voting stock of the Company.
Disposition of Common Shares
A
Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such Holder on a disposition
of Common Shares unless such shares constitute “taxable Canadian property” (as defined in the Tax Act) of the Holder
at the time of the disposition and the Holder is not entitled to relief under an applicable income tax convention.
Generally,
as long as the Common Shares are then listed on a designated stock exchange (which currently includes the TSX and the Nasdaq),
the Common Shares will not constitute taxable Canadian property of a Holder, unless at any time during the 60-month period
immediately preceding the disposition the following two conditions are met concurrently: (a) the Holder, persons with
which the Holder does not deal at arm’s length, partnerships whose members include, either directly or indirectly through
one or more partnerships, the Holder or persons which do not deal at arm’s length with the Holder, or any combination of
them, owned 25% or more of the issued shares of any class or series of shares of the capital stock of the Company, and (b) more
than 50% of the fair market value of the Common Shares derived directly or indirectly, from one or any combination of real or immovable
property situated in Canada, “Canadian resource properties”, “timber resource properties” (each as defined
in the Tax Act), and options in respect of or interests in, or for civil law rights in, any such property (whether or not such
property exists). The Tax Act may also deem the Common Shares to be taxable Canadian property
in certain circumstances. Holders whose Common Shares are taxable Canadian property should consult their own tax advisors.
WHERE YOU CAN FIND MORE INFORMATION
We are required to
file with the securities commission or authority in each of the applicable provinces of Canada annual and quarterly reports,
material change reports and other information. In addition, we are subject to the informational requirements of the Exchange
Act, and, in accordance with the Exchange Act, we also file reports with, and furnish other information to, the SEC. Under a
multijurisdictional disclosure system adopted by the United States and Canada, these reports and other information (including
financial information) may be prepared in accordance with the disclosure requirements of Canada, which differ in certain
respects from those in the United States. As a foreign private issuer, we are exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In
addition, we are not required to publish financial statements as promptly as U.S. companies.
You
may read any document we file with the securities commissions and authorities of the provinces of Canada through SEDAR at www.sedar.com
and any document we file with, or furnish to, the SEC at www.sec.gov.
AUDITORS, TRANSFER AGENT AND REGISTRAR
Grant Thornton LLP was
reappointed as our auditor at our annual general meeting of shareholders held on September 3, 2020. Grant Thornton LLP is
located at Suite 1600 — 333 Seymour Street, Vancouver, British Columbia, V6B 0A4, Canada. Grant Thornton LLP has reported
on our fiscal December 31, 2019, 2018 and 2017 audited consolidated financial statements, which have been filed with the securities
regulatory authorities and incorporated by reference herein. Grant Thornton LLP is independent with respect to the Company within
the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of British Columbia.
Our transfer agent and
the registrar for our Common Shares in Canada is Computershare Investor Services Inc. located at 510 Burrard Street, 2nd Floor,
Vancouver, British Columbia, Canada, V6C 3B9 and in the United States is Computershare Trust Company N.A. located at 740 —
350 Indiana St., Golden, Colorado, 80401.
LEGAL MATTERS
Certain legal matters related
to the Company’s securities offered by this prospectus supplement will be passed upon on its behalf by Blake, Cassels &
Graydon LLP, with respect to matters of Canadian law, and Skadden, Arps, Slate, Meagher & Flom LLP, with respect to matters
of U.S. law. As of the date of this prospectus supplement, the partners and associates of Blake, Cassels & Graydon LLP
and Skadden, Arps, Slate, Meagher & Flom LLP each beneficially own, directly or indirectly, less than 1% of our outstanding
Common Shares, respectively.
ENFORCEABILITY OF CIVIL LIABILITIES
We are a company continued
under the Canada Business Corporations Act. Most of our directors and officers and the experts named in this prospectus supplement,
are residents of Canada or otherwise reside outside the United States, and all or a substantial portion of their assets may be,
and a substantial portion of the Company’s assets are, located outside the United States. We have appointed an agent for
service of process in the United States (as set forth above), but it may be difficult for holders of securities who reside in the
United States to effect service within the United States upon those directors, officers and experts who are not residents of the
United States. It may also be difficult for holders of securities who reside in the United States to realize in the United States
upon judgments of courts of the United States predicated upon our civil liability and the civil liability of our directors, officers
and experts under the United States federal securities laws.
We have been advised that
a judgment of a U.S. court predicated solely upon civil liability under U.S. federal securities laws or the securities or “blue
sky” laws of any state within the United States, would likely be enforceable in Canada if the United States court in which
the judgment was obtained has a basis for jurisdiction in the matter that would be recognized by a Canadian court for the same
purposes. We have also been advised, however, that there is substantial doubt whether an action could be brought in Canada in the
first instance on the basis of the liability predicated solely upon U.S. federal securities laws.
We filed with the
SEC, concurrently with our registration statement on Form F-10 of which this prospectus supplement and the accompanying
base shelf prospectus are a part, an appointment of agent for service of process on Form F-X. Under the Form F-X,
we appointed CT Corporation System, 111 Eighth Avenue, New York, New York 10011 as our agent for service of process in the
United States in connection with any investigation or administrative proceeding conducted by the SEC, and any civil suit or
action brought against or involving us in a U.S. court arising out of or related to or concerning the offering of securities
under the accompanying base shelf prospectus.
Amendment No. 1 dated December 14, 2020
to Short Form Base Shelf Prospectus dated August 12, 2020
Information contained
herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities
and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
U.S.$125,000,000
Common Shares
Preferred Shares
Debt Securities
Subscription Receipts
Units
Warrants
The
short form base shelf prospectus dated August 12, 2020 (the “Prospectus”) of Neovasc Inc. (“Neovasc”
or the “Company”) is hereby amended by this amendment to increase the aggregate amount of securities that may be offered
from time to time under the Prospectus from US$100,000,000 to US$125,000,000 and to qualify the Prospectus for distribution in
the United States under a multijurisdictional disclosure system adopted by the United States and Canada. As of the date
of this amendment, the Company has distributed Units with an aggregate principal amount of US$6,106,810.02 under the Prospectus.
Capitalized terms used but not otherwise defined in this amendment have the meanings ascribed thereto in the Prospectus.
Specifically, the Prospectus is amended
by deleting all references to “US$100,000,000” contained on the face page of the Prospectus and substituting “US$125,000,000”
therefor. The first paragraph of the text on the face page of the Prospectus, as so amended, is deleted and replaced with the following:
“This prospectus relates to the offering
for sale from time to time, during the 25 month period that this prospectus, including any amendments hereto, remains effective,
of the securities of Neovasc Inc. listed above in one or more series or issuances, with a total offering price of such securities,
in the aggregate, of up to U.S.$125,000,000. The securities may be offered by us or by our security holders. The securities may
be offered separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of
the sale and set forth in an accompanying prospectus supplement.”
The Prospectus is further amended by deleting
the fifth paragraph contained on the face page of the Prospectus, and replaced with the following:
“The offering of securities hereunder
is made by a Canadian issuer that is permitted, under a multijurisdictional disclosure system (“MJDS”) adopted by
the United States and Canada, to prepare the Prospectus in accordance with Canadian disclosure requirements. Prospective investors
should be aware that such requirements are different from those of the United States. The financial statements included or incorporated
herein have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (“IFRS”) and are subject to Canadian auditing and auditor independence standards and thus may not
be comparable to financial statements of United States companies.
Owning our securities may subject you
to tax consequences both in Canada and the United States. Such tax consequences are not fully described in this prospectus and
may not be fully described in any applicable prospectus supplement. You should read the tax discussion in any prospectus supplement
with respect to a particular offering and consult your own tax advisor with respect to your own particular circumstances.”
The Prospectus is further amended by deleting
the seventh paragraph under the heading “About This Prospectus” on page 3, so that such paragraph, as so amended, reads
as follows:
“This prospectus is part of a registration
statement on Form F-10 (the “U.S. Registration Statement”) relating to the securities that the Company has or will
file with the SEC. Under the U.S. Registration Statement, the Company may, from time to time, sell securities described in this
prospectus in one or more offerings up to an aggregate offering amount of US$125,000,000. This prospectus, which constitutes part
of the U.S. Registration Statement, provides you with a general description of the securities that the Company may offer. Each
time the Company sells securities under the U.S. Registration Statement, it will provide a prospectus supplement that will contain
specific information about the terms of that offering of securities. A prospectus supplement may also add, update or change information
contained in this prospectus. Before you invest, you should read both this prospectus and any applicable prospectus supplement
together with additional information described under the heading “Documents Incorporated by Reference”. This prospectus
does not contain all of the information set forth in the U.S. Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the SEC, or the schedules or exhibits that are part of the U.S. Registration Statement. Investors
in the United States should refer to the U.S. Registration Statement and the exhibits thereto for further information with respect
to Neovasc and the securities.”
The Prospectus is further amended by deleting
the first paragraph under the heading “Where You Can Find More Information” on page 48, and replaced with the following:
“We are required to file with the
securities commission or authority in each of the applicable provinces of Canada annual and quarterly reports, material change
reports and other information. In addition, we are subject to the informational requirements of the Exchange Act, and, in accordance
with the Exchange Act, we also file reports with, and furnish other information to, the SEC. Under a multijurisdictional disclosure
system adopted by the United States and Canada, these reports and other information (including financial information) may be prepared
in accordance with the disclosure requirements of Canada, which differ in certain respects from those in the United States. As
a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements,
and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions
contained in Section 16 of the Exchange Act. In addition, we are not required to publish financial statements as promptly as U.S.
companies. In addition, we are not required to publish financial statements as promptly as U.S. companies. However, we file with
the SEC an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm,
and submit to the SEC, on Form 6-K, unaudited quarterly financial information.”
The Prospectus is further amended by adding
the following section immediately preceding the section titled “Exchange Rate Information” on page 9:
“DOCUMENTS FILED AS PART OF THE
REGISTRATION STATEMENT
The following documents have been or will
be filed with the SEC as part of the registration statement of which this prospectus forms a part: (i) the documents
listed under the heading “Documents Incorporated by Reference” as well as the management information circular of the
Company dated July 28, 2020, prepared in connection with the annual general meeting of shareholders of the Company held on September
3, 2020, the unaudited condensed interim consolidated financial statements of the Company as at September 30, 2020 and for the
three and nine months ended September 30, 2020 and 2019, together with the notes thereto, the management's discussion and analysis
of financial condition and results of operations of the Company for the three and nine months ended September 30, 2020 and the
material change report dated August 13, 2020; (ii) powers of attorney from our directors and officers; (iii) the consent
of Grant Thornton LLP; and (iv) the form of indenture relating to the debt securities that may be issued under this prospectus.”
The Prospectus is further amended by adding
the following paragraph immediately succeeding the first paragraph under the heading “Enforceability of Civil Liabilities”
on page 48:
“We filed with the SEC, concurrently
with our registration statement on Form F 10 of which this prospectus is a part, an appointment of agent for service of process
on Form F X. Under the Form F X, we appointed CT Corporation System, 111 Eighth Avenue, New York, New York 10011 as our agent for
service of process in the United States in connection with any investigation or administrative proceeding conducted by the SEC,
and any civil suit or action brought against or involving us in a U.S. court arising out of or related to or concerning the offering
of securities under this prospectus.”
The Prospectus must be read together with
this amendment, any documents incorporated or deemed to be incorporated by reference therein from time to time and any supplements
relating to an offering of securities thereunder. The statements contained in the Prospectus or in a document incorporated or deemed
to be incorporated by reference therein on or subsequent to August 12, 2020 are modified or superseded for the purposes of this
amendment to the extent that a statement contained in any subsequently filed document, which also is or is deemed to be incorporated
by reference therein, modifies or supersedes that statement.
Investment in the securities being offered
is highly speculative and involves significant risks that you should consider before purchasing such securities. You should carefully
review the risks outlined in this prospectus (including any prospectus supplement) and in the documents incorporated by reference
as well as the information under the heading “Forward-Looking Statements” and consider such risks and information
in connection with an investment in the securities. See “Risk Factors”.
The offering of securities hereunder
is made by a Canadian issuer that is permitted, under a multijurisdictional disclosure system (“MJDS”) adopted by the
United States and Canada, to prepare the Prospectus in accordance with Canadian disclosure requirements. Prospective investors
should be aware that such requirements are different from those of the United States. The financial statements included or incorporated
herein have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (“IFRS”) and are subject to Canadian auditing and auditor independence standards and thus may not be
comparable to financial statements of United States companies.
Owning our securities may subject you
to tax consequences both in Canada and the United States. Such tax consequences are not fully described in this prospectus and
may not be fully described in any applicable prospectus supplement. You should read the tax discussion in any prospectus supplement
with respect to a particular offering and consult your own tax advisor with respect to your own particular circumstances.
Your ability to enforce civil liabilities
under the U.S. federal securities laws may be affected adversely because we are incorporated under the federal laws of Canada,
most of our officers and directors and the experts named in this prospectus are Canadian residents, and a substantial portion of
our assets and the assets of those officers, directors and experts are located outside of the United States.
Neither the SEC, nor any state securities
regulator has approved or disapproved the securities offered hereby or passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offence.
No underwriter has been involved in
the preparation of this prospectus or performed any review of the contents of this prospectus.
ENFORCEABILITY
OF CIVIL LIABILITIES
We are a company continued under the CBCA.
Most of our directors and officers, and the experts named in this prospectus, are residents of Canada or otherwise reside outside
the United States, and all or a substantial portion of their assets may be, and a substantial portion of the Company’s
assets are, located outside the United States. We have appointed an agent for service of process in the United States
(as set forth below), but it may be difficult for holders of securities who reside in the United States to effect service
within the United States upon those directors, officers and experts who are not residents of the United States. It may
also be difficult for holders of securities who reside in the United States to realize in the United States upon judgments
of courts of the United States predicated upon our civil liability and the civil liability of our directors, officers and
experts under the United States federal securities laws. We have been advised that a judgment of a U.S. court predicated
solely upon civil liability under U.S. federal securities laws or the securities or “blue sky” laws of any state
within the United States, would likely be enforceable in Canada if the United States court in which the judgment was
obtained has a basis for jurisdiction in the matter that would be recognized by a Canadian court for the same purposes.
We have also been advised, however, that
there is substantial doubt whether an action could be brought in Canada in the first instance on the basis of the liability predicated
solely upon U.S. federal securities laws.
We filed with the SEC, concurrently with
our registration statement on Form F-10 of which this prospectus is a part, an appointment of agent for service of process on Form
F X. Under the Form F X, we appointed CT Corporation System, 111 Eighth Avenue, New York, New York 10011 as our agent for service
of process in the United States in connection with any investigation or administrative proceeding conducted by the SEC, and any
civil suit or action brought against or involving us in a U.S. court arising out of or related to or concerning the offering of
securities under this prospectus.”
SHORT FORM BASE SHELF PROSPECTUS
|
New Issue and Secondary Offering
|
August 12, 2020
|
U.S.$100,000,000
Common Shares
Preferred Shares
Debt Securities
Subscription Receipts
Units
Warrants
This prospectus relates to the offering
for sale from time to time, during the 25-month period that this prospectus, including any amendments hereto, remains effective,
of the securities of Neovasc Inc. (“Neovasc” or the “Company”) listed above in one or more series
or issuances, with a total offering price of such securities, in the aggregate, of up to U.S.$100,000,000. The securities may be
offered by us or by our security-holders. The securities may be offered separately or together, in amounts, at prices and on terms
to be determined based on market conditions at the time of the sale and set forth in an accompanying prospectus supplement.
Our common shares in the capital of the
Company (“Common Shares”) are listed on the Toronto Stock Exchange (“TSX”) and on the Nasdaq Capital Market
(“Nasdaq”), under the symbol “NVCN”. On August 11, 2020, the last trading day before the date hereof, the
closing price per share of our Common Shares was C$3.05 on the TSX and U.S.$ $2.29 on the Nasdaq. Unless otherwise specified in
an applicable prospectus supplement, our preferred shares, debt securities, subscription receipts, units and warrants will not
be listed on any securities or stock exchange or on any automated dealer quotation system. There is currently no market through
which our securities, other than our Common Shares, may be sold and purchasers may not be able to resell such securities purchased
under this prospectus. This may affect the pricing of our securities, other than our Common Shares, in the secondary market, the
transparency and availability of trading prices, the liquidity of these securities and the extent of issuer regulation. See “Risk Factors”.
All information permitted under
securities legislation to be omitted from this prospectus will be contained in one or more prospectus supplements that will
be delivered to purchasers together with this prospectus. Each prospectus supplement will be incorporated by reference into
this prospectus for the purposes of securities legislation as of the date of the prospectus supplement and only for the
purposes of the distribution of the securities to which the prospectus supplement pertains. You should read this prospectus
and any applicable prospectus supplement carefully before you invest in any securities issued pursuant to this prospectus.
Our securities may be sold pursuant to this prospectus through underwriters or dealers or directly or through agents
designated from time to time at amounts and prices and other terms determined by us or any selling security-holders. In
connection with any underwritten offering of securities, the underwriters may over-allot or effect transactions which
stabilize or maintain the market price of the securities offered. Such transactions, if commenced, may discontinue at any
time. See “Plan of Distribution”. A prospectus supplement will set out the names of any underwriters, dealers,
agents or selling security-holders involved in the sale of our securities, the amounts, if any, to be purchased by
underwriters, the plan of distribution for such securities, including the net proceeds we expect to receive from the sale of
such securities, if any, the amounts and prices at which such securities are sold and the compensation of such underwriters,
dealers or agents.
Investment in the securities being offered
is highly speculative and involves significant risks that you should consider before purchasing such securities. You should carefully
review the risks outlined in this prospectus (including any prospectus supplement) and in the documents incorporated by reference
as well as the information under the heading “Forward-Looking Statements” and consider such risks and information in
connection with an investment in the securities. See “Risk Factors”.
Owning our securities may subject you
to tax consequences. Such tax consequences are not fully described in this prospectus and may not be fully described in any applicable
prospectus supplement. You should read the tax discussion in any prospectus supplement with respect to a particular offering and
consult your own tax advisor with respect to your own particular circumstances.
Your ability to enforce civil liabilities
under the U.S. federal securities laws may be affected adversely because we are incorporated under the federal laws of Canada,
most of our officers and directors and the experts named in this prospectus are Canadian residents, and a substantial portion of
our assets and the assets of those officers, directors and experts are located outside of the United States.
Neither the SEC, nor any state securities
regulator has approved or disapproved the securities offered hereby or passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offence.
No underwriter has been involved in
the preparation of this prospectus or performed any review of the contents of this prospectus.
Our head office is located at Suite 5138 –
13562 Maycrest Way, Richmond, British Columbia, V6V 2J7 and our registered office is located at Suite 2600 –
595 Burrard Street, Vancouver, British Columbia, V7X 1L3, Canada.
Certain of the Company’s directors
reside outside of Canada and have appointed an agent for service of process in Canada. See “Agent for Service of Process”.
Investors should rely only on the information
contained in or incorporated by reference into this prospectus and any applicable prospectus supplement. The Company has not authorized
anyone to provide investors with different information. Information contained on the Company’s website shall not be deemed
to be a part of this prospectus (including any applicable prospectus supplement) or incorporated by reference and should not be
relied upon by prospective investors for the purpose of determining whether to invest in the securities. The Company will not make
an offer of these securities in any jurisdiction where the offer or sale is not permitted. Investors should not assume that the
information contained in this prospectus is accurate as of any date other than the date on the face page of this prospectus or
any applicable prospectus supplement.
TABLE OF CONTENTS
GLOSSARY
This glossary contains general terms used
in the discussion of the cardiovascular medical device industry, as well as specific technical terms used in the descriptions of
the Company’s technology and business.
Angioplasty: a procedure for the
elimination of areas of narrowing in blood vessels.
Aortic: of or pertaining to the
aorta or aortic heart valve.
Artery: blood vessel that carries
oxygenated blood from the heart to the body’s organs.
Balloon catheter: hollow tube with
a tiny balloon on its tip, used for gaining access to the arteries; once the catheter is in position, the balloon is inflated in
order to push open a section of artery that is obstructed (see Angioplasty).
Biocompatible: materials that can
be implanted or used in a patient without the body reacting adversely to the material.
Bovine: of or derived from or pertaining
to a cow.
Cardiac reconstruction: procedure
to repair damaged portions of the heart in order to improve its function.
Cardiovascular: system encompassing
the heart, veins and arteries.
Cardiovascular disease: disease
that restricts blood flow within the arteries, generally due to a build-up of Plaque; may refer to coronary or peripheral arteries,
or both.
Catheter: hollow tube used for gaining
access to the arteries, either to deliver medications or devices, or to withdraw fluids or samples from the body.
CCS: the Canadian Cardiovascular
Society.
CE Mark: designation used to signify
regulatory approval for the sale of a product in the European Union.
Coronary Artery: artery that supplies
oxygen-rich blood to the heart muscle.
Coronary Artery Disease: disease
that affects the Coronary Arteries (the arteries that provide oxygenated blood to the heart muscle); also called cardiovascular
disease. (See Cardiovascular disease).
COSIRA: the Company’s Coronary
Sinus Reducer for Treatment of Refractory Angina clinical trial - a multi-center, double blinded sham controlled study intended
to assess the safety and efficacy of the Reducer in a rigorous, controlled manner.
COSIRA-II: the Company’s Coronary
Sinus Reducer for Treatment of Refractory Angina clinical trial — a multicenter, randomized, double-blinded, sham-controlled
clinical trial of approximately 380 participants at up to 35 investigational centers in North America who will be randomized and
followed through 5 years.
FDA: U.S. Food and Drug Administration;
governing body that regulates approval for the sale of medical devices in the United States.
French: The French size is a measure
of the external diameter of a catheter, a catheter of 1 French has a diameter of ⅓ mm.
IDE: an investigational device exemption,
which allows the investigational device to be used in a U.S. clinical study in order to collect safety and effectiveness data required
to support a Premarket Approval (PMA) application or a Premarket Notification 510(k) submission to the FDA. All clinical evaluations
of investigational devices in the United States, unless exempt, must have an approved IDE before the study is initiated.
Interventional Cardiology: practice
of treating Coronary Artery Disease intravascularly; that is, through the arterial system using minimally invasive techniques,
rather than with open-heart surgery.
Mitral: of or pertaining to the
mitral heart valve.
Mitral Regurgitation: inadequate
function of the mitral valve allowing blood to leak back through the closed valve. This is a severe and debilitating medical condition.
Pericardium: sac in the chest cavity
that contains the heart; pericardial tissue is the soft tissue that forms the sac.
PeripatchTM: tissue material
made from bovine or Porcine pericardium; used to repair damaged/diseased vessels or organs by working as an internal bandage or
as a component in the manufacture of heart valves.
Plaque: deposit of fats, cholesterol
and other substances on artery walls that eventually causes arteries to become narrowed, restricting proper blood flow.
Porcine: of or derived from or pertaining
to a swine or pig.
Reducer: the Neovasc Reducer™,
Neovasc’s proprietary technology for the treatment of refractory angina.
Tiara: the Tiara™, Neovasc’s
proprietary transcatheter mitral valve system in development for the transcatheter treatment of mitral valve disease.
TIARA-I: the Company’s multinational,
multicenter early feasibility study being conducted to assess the safety and performance of the Tiara in high risk surgical contexts.
TIARA-II: the Company’s multinational,
multicenter study evaluating the Tiara’s safety and performance. It is expected that data from this study will be used to
file for CE Mark approval.
Transcatheter: implanted or completed
via a catheter or small tube instead of surgically.
Transcatheter heart valves: specialized
artificial heart valves which are implanted via a catheter rather than a traditional surgical approach.
Vein: blood vessel that carries
de-oxygenated blood from the body organs to the heart.
Vessel: artery, vein or duct that
carries blood through the body.
ABOUT
THIS PROSPECTUS
You should rely only on the information
contained or incorporated by reference in this prospectus or any applicable prospectus supplement. We have not authorized anyone
to provide you with different or additional information. If anyone provides you with different or additional information, you should
not rely on it. We are not making an offer to sell or seeking an offer to buy the securities offered pursuant to this prospectus
in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus
or any applicable prospectus supplement is accurate only as of the date on the front of those documents and that information contained
in any document incorporated by reference is accurate only as of the date of that document, regardless of the time of delivery
of this prospectus or any applicable prospectus supplement or of any sale of our securities pursuant thereto. Our business, financial
condition, results of operations and prospects may have changed since those dates.
Market data and certain industry forecasts
used in this prospectus or any applicable prospectus supplement and the documents incorporated by reference in this prospectus
or any applicable prospectus supplement were obtained from market research, publicly available information and industry publications.
We believe that these sources are generally reliable, but the accuracy and completeness of this information is not guaranteed.
We have not independently verified such information, and we do not make any representation as to the accuracy of such information.
In this prospectus and any prospectus
supplement, unless otherwise indicated, all dollar amounts and references to “U.S.$” or “$” are to
U.S. dollars and references to “C$” are to Canadian dollars. This prospectus and the documents incorporated
by reference contain translations of some Canadian dollar amounts into U.S. dollars solely for your convenience. See
“Exchange Rate Information”.
On September 18, 2018, the Company effected
a share consolidation (reverse stock split) of its issued and outstanding Common Shares on the basis of one post-consolidation
Common Share for every one hundred pre-consolidation Common Shares. On June 25, 2019, the Company effected a further share consolidation
(reverse stock split) of its issued and outstanding Common Shares on the basis of one post-consolidation Common Share for every
ten pre-consolidation Common Shares. All references in this prospectus to Common Shares, options and exercise or purchase prices
have been retroactively adjusted to reflect the share consolidations.
In this prospectus and in any prospectus
supplement, unless the context otherwise requires, references to “we”, “us”, “our” or similar
terms, as well as references to “Neovasc” or the “Company”, refer to Neovasc Inc., either alone or
together with our subsidiaries.
The names Neovasc Reducer™ and Tiara™
are our trademarks. Other trademarks, product names and company names appearing in this prospectus and any prospectus supplement
and documents incorporated by reference in this prospectus and any prospectus supplement are the property of their respective owners.
Under this prospectus we may offer and
issue from time to time any combination of the securities described in this prospectus in one or more offerings up to an aggregate
initial offering price of US$100,000,000.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents
incorporated by reference herein and therein, contain forward-looking statements within the meaning of applicable Canadian securities
legislation and the U.S. Private Securities Litigation Reform Act of 1995 that may not be based on historical fact, including,
without limitation, statements containing the words “believe”, “may”, “plan”, “will”,
“estimate”, “continue”, “anticipate”, “intend”, “expect” and similar
expressions. Forward- looking statements are necessarily based on estimates and assumptions made by us in light of our experience
and perception of historical trends, current conditions and expected future developments, as well as the factors we believe are
appropriate. Forward-looking statements in this prospectus and the documents incorporated by reference herein and therein include,
but are not limited to, statements relating to:
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our ability to continue as a going concern;
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our need for significant additional financing and our estimates regarding our capital requirements
and future revenues, expenses and profitability;
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our intended use of the net proceeds from the August 2020 offering (the “August Offering”)
of units comprised of one Common Share and three-quarters of one common share purchase warrants (the “August Units”);
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our intended use of the net proceeds from the June 2020 offering (the “June Offering”)
of units comprised of one Common Share and three-quarters of one common share purchase warrants (the “June Units”);
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our intended use of the net proceeds from the May 2020 private placement offering (the “May
Offering”) of the secured convertible notes (the “2020 Notes”) and common share purchase warrants (the “May
2020 Warrants”);
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our estimates regarding our fully diluted share capital and future dilution to shareholders;
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our intention to remediate our material weakness in internal control over financial reporting (“ICFR”)
as of December 31, 2019, 2018 and 2017;
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our intention to expand the indications for which we may market the Tiara (which does not have
regulatory approval and is not commercialized) and the Reducer (which has CE Mark approval for sale in the European Union);
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clinical development of our products, including the results of current and future clinical trials
and studies;
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our intention to apply for CE Mark approval for the Tiara in approximately 2020 and look for potentially
faster pathways to such approval;
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the anticipated timing of additional implantations in the TIARA-II trial and our intention to initiate
additional investigational sites in 2020 as required approvals are obtained;
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our plans to develop and commercialize products, including the Tiara, and the timing and cost of
these development programs;
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our plans to develop and commercialize the Tiara transfemoral trans-septal system, including our
ability to improve current prototypes;
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our ability to grow revenues from the Reducer in a timely manner;
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whether we will receive, and the timing and costs of obtaining, regulatory approvals;
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our efforts to obtain approval for entrance into the U.S. market for the Reducer, including our
discussions with the FDA and potential pathways to the U.S. market;
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the cost of post-market regulation if we receive necessary regulatory approvals;
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our ability to enroll patients in our clinical trials, studies and compassionate use cases in Canada,
the United States, Europe, Israel and other markets;
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our ability to advance and complete the COSIRA-II IDE pivotal clinical trial;
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our belief that the totality of clinical evidence from the COSIRA study, REDUCER-I European Post-Market
study and studies published in peer-reviewed journals, will provide reasonable assurance of safety and effectiveness to support
a full Premarket Approval application (“PMA”);
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our belief that the full PMA application pathway brings the best chance of success within reasonable
cost and time constraints for Tiara;
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our belief that the TIARA-I Early Feasibility study demonstrates the safety of the Neovasc transcatheter
mitral valve replacement system;
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our belief that the clinical evidence already available will be sufficient to support the availability
of Tiara for the treatment of patients in Europe;
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our intention to continue directing a significant portion of our resources into sales expansion;
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our ability to get our products approved for use;
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the benefits and risks of our products as compared to others;
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our ability to find strategic alliances for adoption of the Reducer, including potential alliances
in order to broaden and deepen therapy penetration and potentially advance the COSIRA-II study;
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our plans to increase Reducer implants in Europe in 2020;
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our expectation that in 2020 more German clinics will negotiate and finalize reimbursement negotiations
with German insurance companies relating to the Reducer;
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our estimates of the size of the potential markets for our products including the anticipated market
opportunities for the Reducer and the Tiara;
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our potential relationships with distributors and collaborators with acceptable development, regulatory and commercialization expertise and the benefits to be derived from such collaborative efforts;
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sources of revenues and anticipated revenues, including contributions from distributors and other third parties, product sales, license agreements and other collaborative efforts for the development and commercialization of products;
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our ability to meet our financial and organizational restructuring goals to establish a lean and accountable organization with stable capitalization;
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our ability to meet our cash expenditure covenants;
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our creation of an effective direct sales and marketing infrastructure for approved products we elect to market and sell directly;
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the rate and degree of market acceptance of our products;
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the timing and amount of reimbursement for our products;
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the composition and compensation of our management team and board of directors;
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the impact of foreign currency exchange rates; and
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the composition and compensation of our board of directors and senior management team in the future.
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Forward-looking statements reflect our
current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number
of estimates and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic,
competitive, political and social uncertainties and contingencies, many of which, with respect to future events, are subject to
change. As of the date of this prospectus supplement, the extent to which the COVID-19 pandemic may materially impact the Company’s
financial condition, liquidity, or results of operations is uncertain. The material factors and assumptions used by us to develop
such forward-looking statements include, but are not limited to:
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our ability to continue as a going concern;
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our regulatory and clinical strategies will continue to be successful;
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our current positive interactions with regulatory agencies will continue;
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recruitment to clinical trials and studies will continue;
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the time required to enroll, analyze and report the results of our clinical studies will be consistent with projected timelines;
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current and future clinical trials and studies will generate the supporting clinical data necessary to achieve approval of marketing authorization applications;
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the regulatory requirements for approval of marketing authorization applications will be maintained;
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our current good relationships with our suppliers and service providers will be maintained;
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our estimates of market size and reports reviewed by us are accurate;
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our efforts to develop markets and generate revenue from the Reducer will be successful;
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genericisation of markets for the Tiara and the Reducer will develop;
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capital will be available on terms that are favorable to us; and
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our ability to retain and attract key personnel, including members of our board of directors and senior management team.
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By their very nature, forward-looking statements
or information involve known and unknown risks, uncertainties and other factors that may cause our actual results, events or developments,
or industry results, to be materially different from any future results, events or developments expressed or implied by such forward-
looking statements or information. In evaluating these statements, prospective purchasers should specifically consider various
factors, including the risks outlined herein and in documents incorporated by reference herein and therein, under the heading “Risk
Factors”. Some of these risks and assumptions include, among others:
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the substantial doubt about our ability to continue as a going concern;
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risks relating to our need for significant additional future capital and our ability to raise additional funding;
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risks relating to the sale of a significant number of Common Shares;
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risks relating to the possibility that our Common Shares may be delisted from the Nasdaq or the TSX, which could affect their market price and liquidity;
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risks related to the recent coronavirus outbreak or other health epidemics, which could significantly impact our operations, sales or ability to raise capital;
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risks relating to the Company’s conclusion that it did not have effective ICFR as of December 31, 2019, 2018 and 2017;
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risks relating to our Common Share price being volatile;
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risks relating to the influence of significant shareholders of the Company over our business operations and share price;
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risks relating to our significant indebtedness, and its effect on our financial condition;
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risks relating to lawsuits that we are subject to, which could divert our resources and result in the payment of significant damages and other remedies;
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risks relating to claims by third parties alleging infringement of their intellectual property rights;
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our ability to establish, maintain and defend intellectual property rights in our products;
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risks relating to results from clinical trials of our products, which may be unfavorable or perceived as unfavorable;
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our history of losses and significant accumulated deficit;
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risks associated with product liability claims, insurance and recalls;
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risks relating to use of our products in unapproved circumstances, which could expose us to liabilities;
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risks relating to competition in the medical device industry, including the risk that one or more competitors may develop more effective or more affordable products;
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risks relating to our ability to achieve or maintain expected levels of market acceptance for our products, as well as our ability to successfully build our in-house sales capabilities or secure third-party marketing or distribution partners;
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our ability to convince public payors and hospitals to include our products on their approved products lists;
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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;
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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;
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risks associated with the extensive regulation of our products and trials by governmental authorities, as well as the cost and time delays associated therewith;
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risks associated with post-market regulation of our products;
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health and safety risks associated with our products and our industry;
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risks associated with our manufacturing operations, including the regulation of our manufacturing processes by governmental authorities and the availability of two critical components of the Reducer;
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risk of animal disease associated with the use of our products;
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risks relating to the manufacturing capacity of third-party manufacturers for our products, including risks of supply interruptions impacting the Company’s ability to manufacture its own products;
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risks relating to our dependence on limited products for substantially all of our current revenues;
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risks relating to our exposure to adverse movements in foreign currency exchange rates;
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risks relating to the possibility that we could lose our foreign private issuer status under U.S. federal securities laws;
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risks relating to the possibility that we could be treated as a “passive foreign investment company” (“PFIC”);
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risks relating to breaches of anti-bribery laws by our employees or agents;
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risks associated with future changes in financial accounting standards and new accounting pronouncements;
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risks relating to our dependence upon key personnel to achieve our business objectives;
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our ability to maintain strong relationships with physicians;
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risks relating to the sufficiency of our management systems and resources in periods of significant growth;
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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;
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risks relating to our ability to successfully identify and complete corporate transactions on favorable terms or achieve anticipated synergies relating to any acquisitions or alliances;
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risks relating to conflicts of interests among the Company’s officers and directors as a result of their involvement with other issuers;
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risks relating to future issuances of equity securities by us, or sales of Common Shares or conversions of convertible notes by our existing security holders, causing the price of our securities to fall;
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risks relating to there being no market through which our securities, other than the Common Shares, may be sold;
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risks associated with the inability to enforce actions against us, certain of our directors and officers, or the experts named in this prospectus under U.S. federal securities laws;
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risks relating to the broad discretion in our use of proceeds from an offering of our securities;
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risks relating to our intention to not pay dividends in the foreseeable future; and
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anti-takeover provisions in our constating documents which could discourage a third party from making a takeover bid beneficial to our shareholders.
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Should one or more of these risks or uncertainties
or a risk that is not currently known to the Company materialize, or should assumptions underlying the forward-looking statements
prove incorrect, actual results may vary materially from those expressed or implied herein. These forward-looking statements are
made as of the date of this prospectus or, in the case of documents incorporated by reference in this prospectus, as of the date
of such documents, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as
required by law. Investors are cautioned that forward- looking statements are not guarantees of future performance and investors
are cautioned not to put undue reliance on forward-looking statements due to their inherent uncertainty.
The Company advises you that these cautionary
remarks expressly qualify in their entirety all forward-looking statements attributable to the Company or persons acting on its behalf.
DOCUMENTS
INCORPORATED BY REFERENCE
Information
has been incorporated by reference in this prospectus from documents filed with securities commissions or similar authorities in
Canada. Copies of the documents incorporated by reference in this prospectus and not delivered with this prospectus
may be obtained on request without charge from the Company Secretary of Neovasc Inc. at Suite 5138 – 13562 Maycrest
Way, Richmond, British Columbia, V6V 2J7, Canada, telephone: (604) 270-4344 or by accessing the disclosure documents
through the Internet on the Canadian System for Electronic Document Analysis and Retrieval, or SEDAR, at www.sedar.com. Documents
filed with, or furnished to, the SEC are available through the SEC’s Electronic Data Gathering and Retrieval System, or EDGAR,
at www.sec.gov.
The following documents, filed with the
securities commissions or similar regulatory authorities in certain provinces of Canada and filed with, or furnished to, the SEC
are specifically incorporated by reference into, and form an integral part of, this prospectus:
Any documents of the type described in
Section 11.1 of Form 44-101F1 Short Form Prospectuses filed by the Company with a securities commission or
similar authority in any province of Canada subsequent to the date of this short form prospectus and prior to the expiry of this
prospectus, or the completion of the issuance of securities pursuant hereto, will be deemed to be incorporated by reference into
this prospectus.
Any template version of any “marketing
materials” (as such term is defined in NI 44-101) filed after the date of a prospectus supplement and before the
termination of the distribution of the securities offered pursuant to such prospectus supplement (together with this prospectus)
is deemed to be incorporated by reference in such prospectus supplement.
A prospectus supplement containing the
specific terms of any offering of our securities will be delivered to purchasers of our securities together with this prospectus
and will be deemed to be incorporated by reference in this prospectus as of the date of the prospectus supplement and only for
the purposes of the offering of our securities to which that prospectus supplement pertains.
Any statement contained in this prospectus
or in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding
statement need not state that it has modified or superseded a prior statement or include any other information set forth in the
document that it modifies or supersedes. The making of a modifying or superseding statement is not to be deemed an admission for
any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of material
fact or an omission to state a material fact that is required to be stated or is necessary to make a statement not misleading in
light of the circumstances in which it was made. Any statement so modified or superseded will not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
Upon filing a new annual information form,
or a new annual report on Form 20-F, as applicable, and the related annual consolidated financial statements and management’s
discussion and analysis with applicable securities regulatory authorities during the currency of this prospectus, the previous
annual information form or annual report on Form 20-F, as applicable, annual consolidated financial statements and management’s
discussion and analysis and all interim consolidated financial statements and the related management’s discussion and analysis,
supplemental information, material change reports and information circulars filed prior to the commencement of the Company’s
financial year in which the new annual information form or annual report on Form 20-F is filed will be deemed no longer to
be incorporated herein for purposes of future offers and sales of our securities under this prospectus. Upon interim consolidated
financial statements and the accompanying management’s discussion and analysis and material change report being filed by
the Company with the applicable securities regulatory authorities during the duration of this prospectus, all interim consolidated
financial statements and the accompanying management’s discussion and analysis and material change report filed prior to
the new interim consolidated financial statements shall be deemed no longer to be incorporated herein or therein for purposes of
future offers and sales of securities under this prospectus.
References to our website in any documents
that are incorporated by reference into this prospectus do not incorporate by reference the information on such website into this
prospectus, and we disclaim any such incorporation by reference.
EXCHANGE
RATE INFORMATION
The following table sets forth for each
period indicated: (i) the daily average exchange rate in effect at the end of the period; (ii) the high and low daily
average exchange rate during such period; and (iii) the daily average exchange rate for such period, for one Canadian dollar,
expressed in U.S. dollars, as quoted by the Bank of Canada.
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Year Ended December 31,
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Six Months Ended June 30,
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2017
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2018
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2019
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2018
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2019
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2020
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Closing
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0.7971
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0.7330
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0.7699
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0.7594
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0.7641
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0.7337
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High
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0.8245
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0.8138
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0.7699
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0.7967
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0.7641
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0.7710
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Low
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0.7276
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0.7330
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0.7353
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0.7513
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0.7393
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0.6898
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Average(1)
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0.7708
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0.7721
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0.7537
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0.7747
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0.7476
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0.7332
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(1)
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Determined by averaging the rates on the last day of each month during the respective period.
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On August 11, 2020, the daily average
exchange rate as quoted by the Bank of Canada was C$1.00 = US$0.7524.
THE
COMPANY
Neovasc was incorporated on November 2,
2000 under the laws of the Province of British Columbia and was continued to federal jurisdiction under the Canada Business Corporations
Act (“CBCA”) on April 19, 2002. Neovasc has seven wholly owned subsidiaries, four of which are material: (i) Neovasc
Tiara Inc. (“NTI”), a corporation incorporated under the federal laws of Canada; (ii) Neovasc Medical Ltd. (“NML”),
a corporation incorporated under the laws of Israel; and (iii) Neovasc Medical Inc. (“NMI”), a corporation incorporated
under the laws of British Columbia and (iv) Neovasc (US) Inc., a corporation incorporated under the laws of Delaware.
Our registered office is located at Suite 2600 –
595 Burrard Street, Three Bentall Center, Vancouver, British Columbia, V7X 1L3, Canada and our head office and principal place
of business are located at Suite 5138 – 13562 Maycrest Way, Richmond, British Columbia, V6V 2J7.
Our Business
Neovasc is a specialty medical device company
that develops, manufactures and markets products for the rapidly growing cardiovascular marketplace. Its products include the Tiara
technology, in development for the transcatheter treatment of mitral valve disease, and the Reducer, for the treatment of refractory
angina.
In 2009, Neovasc started initial activities
to develop novel technologies for catheter-based treatment of mitral valve disease. Based on the early positive results of these
activities, the Company formally launched a program to develop the Tiara. Neovasc established a separate entity, NTI, in March 2013
to develop and own the intellectual property related to the Tiara (Neovasc has transferred all intellectual property related to
Tiara to NTI). On February 3, 2014, Neovasc announced the first human implant of the Tiara under special access compassionate
use exemptions. Subsequently additional patients have been treated with the Tiara bringing the total number of patients treated
with the device to 83 through July 23, 2020. In December 2014, the Company announced that it had received approval from
the FDA to initiate the TIARA-I study in the United States. The TIARA-I study is a multinational, multicenter early feasibility
study being conducted to assess the safety and performance of the Tiara valve system in high risk surgical patients. The study
includes 27 patients enrolled at centers in the United States, Canada and Belgium. We received approval from the FDA to close enrollment
in the TIARA-I study in the United States on November 15, 2019. On November 28, 2016, the Company announced that it had
received both regulatory and ethics committee approval to initiate the TIARA-II in Italy. The TIARA-II study has since expanded
through the opening of clinical sites in Germany, Israel, Spain and the United Kingdom. The TIARA-II study is a 115 patient,
non-randomized, prospective clinical study evaluating the Tiara’s safety and performance. It is expected that data from this
study will be used to file for CE Mark approval which would enable Neovasc to market the device in Europe.
In July 2008, Neovasc acquired NML,
a pre-commercial vascular device company based in Israel. NML developed and owned intellectual property related to a novel catheter-based
treatment for refractory angina, a debilitating condition resulting from inadequate blood flow to the heart muscle. Refractory
angina, resulting in continuing symptoms despite maximal medical therapy and without further revascularization options, is estimated
to affect 600,000 to 1.8 million Americans, with 50,000 to 100,000 new cases per year. A publication in the Cardiovascular
Revascularization Medicine Journal by Benck and Henry suggests that the prevalence of No-Option Refractory Disabling Angina
(NORDA) in the U.S. population is between 26,000 and 52,000. In another publication in the European Heart Journal by Crea
et al., stated persistence of angina caused by incomplete coronary revascularization may occur in up to 30% in the current era,
although definitions of incomplete revascularization are heterogeneous. It further stated that persistent angina is associated
with a significant economic burden with healthcare costs almost being two-fold higher among patients with persistent angina post-percutaneous
coronary intervention vs. those who become symptom free. The Company completed development of the Reducer and obtained authorization
to affix the CE Mark, which allows for marketing of the Reducer product in the European marketplace. The Company initiated commercial
sales of the Reducer product in early-2015. In March 2014, the Company announced that results of its COSIRA clinical trial
had been presented at the ACC.14 medical conference. The COSIRA trial was a sham-controlled randomized, double-blinded study of
the Reducer device in 104 patients with moderate to severe refractory angina. The results presented at ACC.14 confirmed that the
COSIRA study had met its primary endpoint demonstrating the efficacy of the Reducer device with statistical significance. The
COSIRA trial results were published in the New England Journal of Medicine in February 2015.
In 2016, Neovasc initiated the REDUCER-I
observational study as a multi-center, multi-country, three-arm study collecting long-term data from European patients implanted
with the Reducer. The study is expected to enroll up to 400 patients. Currently, 255 patients have been enrolled across 23 centers
that are active in Italy, Germany, Austria, Belgium, the Netherlands, the United Kingdom, Spain and Switzerland In February 2018,
the Reducer reached NUB 1 status in Germany, the highest level for important new therapies. NUB 1 status was renewed in January 2019
and again in January 2020. In 2018 and 2019. In 2020, more German clinics will continue to negotiate and finalize these reimbursement
negotiations.
In October 2018, the Company announced
that the FDA designated the Reducer as a Breakthrough Device. In December 2018, the Company filed a Q-Sub submission to the
FDA containing a comprehensive overview of all available Reducer Clinical data, real world performance data and a risk/benefit
analysis for patients with refractory angina requesting an FDA Sprint discussion meeting. The Sprint discussion occurred during
January 2019. On February 20, 2019 the Company announced that the FDA had informed Neovasc that, despite “Breakthrough
Device Designation”, the FDA review team recommends collection of further pre-market blinded data prior to PMA submission.
Through the Sprint discussion process, Neovasc will continue discussions with the FDA and their senior management to attempt to
bring this promising refractory angina device therapy to U.S. patients as soon as possible. On December 31, 2019, the Company
announced the submission of a PMA to the FDA for the Reducer.
Neovasc’s business operations started
in March 2002, with the acquisition of NMI. NMI manufactured a line of collagen-based surgical patch products made for use
in cardiac reconstruction and vascular repair procedures as well as other surgeries. Neovasc, through NMI, also sold biological
tissue to industry partners and other customers who incorporated this tissue into their own products such as transcatheter heart
valves. Neovasc’s biological products were made from chemically treated biocompatible pericardial tissue. In 2012, Neovasc
sold the rights to manufacture a specific line of conventional surgical patch products to LeMaitre Vascular, Inc. for $4.6
million but retained rights to the underlying tissue technology for all other uses. On December 2, 2016, the Company and Boston
Scientific entered into a definitive agreement for Boston Scientific Corporation to acquire Neovasc’s advanced biologic tissue
capabilities and certain manufacturing assets and make a 15% equity investment in Neovasc, for a total of $75 million in cash.
Neovasc retained a license for its own Tiara products but ceased operations of its consulting services and contract manufacturing
revenue line items in 2017.
Our Strategy
The Company’s core strategy is to
focus on re-establishing trust and confidence with its stakeholders, to re-structure the Company’s financing and to continue
the development and commercialization of its products, the Tiara and the Reducer, providing minimally invasive medical devices
for a cardiovascular market that the Company believes is both growing and under-served by current treatment solutions.
Key elements of this strategy include:
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Tiara — with the Company’s clinical experience of the Tiara, and the clinical data from the TIARA-II multi-center, the company has filed for CE Mark under the Medical Device Directive (“MDD”). Completing the TIARA-I study; enrollment in the TIARA-I study was closed on November 15, 2019 with a total of 27 patients treated who will be followed out to 5 years. Development of the Tiara transfemoral trans-septal system for preclinical bench and animal studies to successful completion, followed by initiation of a first in human feasibility clinical study early 2021.
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Reducer — continuing therapy development of the Reducer, and supplementing the successful COSIRA prospective, multicenter, randomized, double-blind, sham-controlled clinical study with additional clinical experience through the Company’s targeted commercial launch of the Reducer in Europe and enrollment in the REDUCER-I, real world post market observational clinical study. Improving revenue growth in Europe by leveraging the renewed NUB 1 status in Germany and by further reimbursement initiatives in other international markets. Seeking strategic alternatives and alliances to build on the growing enthusiasm in the market for, and adoption of, the Reducer, in order to broaden and deepen therapy penetration in Europe and the Middle East. Continuing to execute on our U.S. strategy and work with the FDA to meet the requirements for entrance into the U.S. market. The Company filed a PMA application for this Breakthrough Device on December 30, 2019 with a request for an Advisory Panel meeting. The Advisory Panel meeting has since been scheduled for October 27, 2020. The Company believes that the totality of clinical evidence from the COSIRA study, REDUCER-I European Post-Market study (with interim results of over 200 of 400 patients enrolled), and multiple independent studies published in peer-reviewed journals, will provide reasonable assurance of safety and effectiveness to support a PMA. While any pathway to U.S. market approval by the FDA carries considerable risk, and there can be no assurance that the PMA will be approved by the FDA in a timely manner or at all, we believe the PMA application pathway brings the best chance of success within reasonable cost and time constraints. While an additional post-market study will most likely be needed and the body of real-world evidence continues to grow, the Company believes that the clinical evidence already available will be sufficient to support the availability of this Breakthrough Device for the treatment of U.S. patients.
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We are currently exploring additional financing options to bring additional capital into the Company and will provide public updates when appropriate.
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Our Products
Tiara
In 2009, Neovasc started initial activities
to develop novel technologies for catheter-based treatment of mitral valve disease. In the second quarter of 2011, the Company
formally initiated a new project to develop the Tiara, a product for treating mitral valve disease. The transapically delivered
Tiara is currently in the clinical trial phase providing a minimally invasive transcatheter device for patients who experience
severe Mitral Regurgitation as a result of functional (most patients) or degenerative mitral heart valve disease, combined with
an enlarged left ventricle. There are millions of patients worldwide who suffer from severe Mitral Regurgitation, the majority
of them with functional Mitral Regurgitation. The unmet medical need in these patients is high. Mitral Regurgitation is often severe
and can lead to heart failure and death. Currently, a significant percentage of patients with severe Mitral Regurgitation are not
good candidates for conventional surgical repair or replacement due to frailty or comorbidities. Many of these patients are treated
today via minimally invasive mitral valve repair procedures; however, these procedures are also complex, can take a long period
of time to complete, and the clinical outcomes may not be optimal. Currently there is no transcatheter mitral valve replacement
device approved for use in the U.S.
Our clinical experience to date has been
with the 35 mm and 40 mm Tiara valves. First clinical use of the 40mm Tiara occurred in the fourth quarter of 2015. These two sizes
allow for the treatment of approximately 75% of the annulus sizes in this high-risk patient population, in our TIARA-I and TIARA-II
Clinical Studies. Currently, approximately 20% of this high-risk patient population meet all inclusion criteria for the Tiara studies
and can be treated.
As of August 11, 2020, 83 patients
have been treated with Tiara in either the TIARA-I Early Feasibility Clinical Study, compassionate use cases or in our TIARA-II
CE Mark Clinical Study. Neovasc believes that early results have been encouraging. The 30-day survival rate for the 83 patients
treated with the Tiara (i.e., those treated more than 30 days ago) is 89% with one patient now almost six and a half years post
implant. The Tiara has successfully treated both functional and degenerative Mitral Regurgitation patients, as well as patients
with pre-existing prosthetic aortic valves and mitral surgical annuloplasty rings. On November 15, 2019, TIARA-I study enrollment
was closed with 27 patients treated . This decision was not due to any safety concerns. The objective of the TIARA-I Early Feasibility
study was to demonstrate the safety of the Neovasc TMVR system, while gathering preliminary information on device performance
and clinical outcomes. With the experience to date, we believe that we have accomplished this objective. The patients that are
in follow-up will continue their follow up assessments, adverse event reporting requirements, etc., as per protocol through
their 5-year visits. This decision had no impact on the TIARA-II CE Mark Study. There are currently 18 active sites across Germany, Israel,
Spain, the Netherlands and the UK with two additional sites close to being activated, however due to the COVID-19 pandemic restrictions,
our sites were notified on April 24, 2020 that we were placing enrollment on temporary hold. The results from our clinical
experience to-date continues to demonstrate the potential benefit for patients who otherwise have no treatment options.
Neovasc believes that there are several
unique attributes of the Tiara that may provide advantages over other approaches to mitral valve replacement, in particular the
low atrial profile, its D shape, enabling a better anatomical fit and less risk of left ventricular outflow tract obstruction,
and its unique combined skirt and anchoring mechanism. The Tiara has successfully treated 17 patients with previous aortic valves
(AVR), including mechanical, bioprosthetic and TAVI, without any LVOT obstruction, no peri-procedural deaths or paravalvular leak.
Data on the first 12 patients with previous AVR treated with Tiara was published in 2018 in Circulation: Cardiovascular Interventions.
There are several other transcatheter mitral
valve replacement devices in development by third-parties, some of which have been implanted in early feasibility type studies,
pivotal U.S. studies, and CE Mark studies with varying results. There is no certainty that the Tiara will successfully proceed
through clinical evaluation and ultimately receive regulatory approval to treat these patients.
The Tiara valve is manufactured, packaged
and labelled in-house by the Company and is made up of two major components: the leaflets which are made from the Peripatch bovine
tissue licensed from Boston Scientific, a fabric skirt, and the nitinol frame (to which the leaflets and skirt are attached), which
is manufactured by a well-established specialty manufacturer in the medical device industry. If this supplier were unable to provide
the nitinol frame in the future, it would seriously impact further development of the Tiara. The Tiara delivery system is manufactured,
packaged and labelled in-house by the Company using customized standard catheter construction components that are readily available
through vendors.
The TIARA-II study is estimated to cost
approximately $15 million. While many challenges remain prior to achieving commercialization (including, but not limited to, positive
clinical trial results and obtaining regulatory approval from the relevant authorities), the Company believes the Tiara is being
recognized as one of the leading mitral valve replacement devices. Neovasc is managing and conducting the TIARA-II study itself
in conjunction with certain service providers who undertake portions of data collection, data management, data analysis, safety
and event monitoring and similar functions. The Tiara is currently manufactured for use in these studies by Neovasc at its own
facilities following required medical device quality requirements. In the event of a positive outcome from the TIARA-II study
and the Company successfully obtaining CE Mark approval, the Tiara would be commercially manufactured in the same manner at Neovasc’s
facility.
Regulatory Status
The Tiara is an early-stage development
product without regulatory approvals in any country. The Company intends to continue to fund development of the product as cash
flow allows. The Company has filed for CE Mark in Europe under the Medical Device Directive and anticipates CE Mark approval first
half 2021. There is no assurance that European regulatory filing and an approval will be granted in the time frame anticipated
by management or granted at any time in the future. There is no expectation that this product will be revenue-generating in the
near term, although management believes that the product is addressing an important unmet clinical need.
Reducer
The Reducer is a treatment for patients
with refractory angina, a painful and debilitating condition that occurs when the coronary vasculature delivers an inadequate supply
of blood to the heart muscle, despite treatment with standard revascularization or cardiac drug therapies.
Worldwide, coronary artery disease (“CAD”)
is the leading cause of death. It is the largest contributor to the global burden of disease as reflected in disability-adjusted
life years, a measure which combines premature mortality and the prevalence and severity of ill-health. On this measure, the impact
of CAD increased by 29% in the period from 1990 to 2010. This reflects the worldwide shift to those chronic diseases associated
with an aging global population. The most frequent (and often the first) manifestation of stable CAD is chronic stable angina.
As a result, angina is a significant burden on healthcare systems worldwide. There is a clear association between more frequent
angina and greater utilization of healthcare resources.
Refractory angina, resulting in continued
symptoms despite maximal medical therapy without revascularization options, is estimated to affect 600,000 to 1.8 million Americans,
with 50,000 to 100,000 new cases per year. A recent publication in the Cardiovascular Revascularization Medicine journal by Benck
and Henry suggests that the prevalence of No-Option Refractory Disabling Angina (NORDA) in the U.S. population is between 26,000
and 52,000. Another publication in the European Heart Journal by Crea et al., stated persistence of angina caused by incomplete
coronary revascularization may occur in up to 30% in the current era, although definitions of incomplete revascularization are
heterogeneous. It further stated that persistent angina is associated with a significant economic burden with healthcare costs
almost being two-fold higher among patients with persistent angina post-percutaneous coronary intervention vs. those who become
symptom free. Additionally, there is emerging interest in treating patients that have refractory angina despite patent coronary
arteries. Angina with non-obstructive coronary artery disease may affect as many as 39% of patients with chest pain according to
a study from Patel et. al, published in the New England Journal of Medicine. Furthermore, a publication in Circulation by Lee et.
al, suggests upwards of 20% of patients with angina and non-obstructive coronary artery disease have evidence of microvascular
dysfunction. Increasing interest in diagnosis and treatment of angina and microvascular dysfunction as evidenced by the 2019 ESC
Guidelines for the diagnosis and management of chronic coronary syndromes provides growing support for Reducer treatment.
The pain and shortness of breath associated
with refractory angina can make it difficult for patients to engage in routine activities, such as walking or climbing stairs.
Clinical studies demonstrate that the Reducer can provide significant relief of chest pain, shortness of breath and other debilitating
symptoms in refractory angina patients. A significant proportion of the refractory angina patients in the United States and in
Europe are potential candidates for the current Reducer therapy, either because they cannot be revascularized or because they are
otherwise poorly managed using conventional medical therapies. These patients represent a substantial potential market opportunity
for the Reducer. There continues to be interest from the medical community to explore the use of Reducer for other indications.
Further clinical trials will need to be conducted to explore this possibility.
The Reducer is targeting a patient population
that has failed to gain relief of their symptoms, despite other medical treatment options. A refractory patient, by definition,
is resistant to other existing interventional cardiology therapies and is not receiving adequate relief from available drug regimens
to manage their chest pain, shortness of breath and other debilitating symptoms. As such there are currently no direct competitors
to the Reducer as the patient will have exhausted all other treatment options before the Reducer is considered. Neovasc believes
that further studies may demonstrate that additional patient populations may benefit from treatment with Reducer and thus could
further increase its market potential.
The Reducer is an hourglass-shaped, balloon-expandable,
stainless steel, bare metal device, which is implanted in the coronary sinus, creating a restriction in venous outflow from the
myocardium (the muscular layer of the heart wall). It is implanted using conventional percutaneous, or needle puncture, techniques.
The Reducer is provided sterile and pre-loaded on a balloon catheter system. The system is 9 French sheath compatible and operates
over a 0.035 inch guidewire. The implant procedure requires minimal training for experienced interventionalists. Once guidewire
access to the coronary sinus is achieved, implantation typically takes less than 20 minutes.
Using a catheter-based procedure, the Reducer
is implanted in the coronary sinus (the main vein draining blood from the heart muscle). Following implantation, the Reducer (all
but the mid-section) becomes covered with endothelial tissue after about 4-6 weeks. This tissue coverage creates a permanent (but
reversible, if necessary) narrowing in the coronary sinus. The coronary sinus is narrowed from a typical diameter of 10-12mm to
approximately 3mm at the site of implantation. This focal narrowing provides a backwards pressure elevation in the coronary sinus
which is intended to improve blood perfusion to ischemic territories of the heart muscle by forcing redistribution of blood from
the less ischemic areas to the more ischemic areas of the heart muscle. This can result in improved perfusion of the endocardium,
which helps relieve ischemia and chest pain, shortness of breath and other debilitating symptoms. The physiological mechanism behind
this effect is well documented in the medical literature.
The clinical utility of this approach was
demonstrated by a number of analogous approaches used in the past that achieved positive clinical outcomes for angina patients
by constricting or intermittently blocking the coronary sinus to improve perfusion to the heart muscle. However, these therapies
required the use of highly invasive surgery, or leaving a catheter in the heart for a prolonged period, making them impractical
or clinically unacceptable for use in modern medical practice. The Reducer was developed to deliver this therapy in a safe, simple
and effective manner via a minimally invasive catheter that is consistent with contemporary medical practice.
The Reducer has demonstrated excellent
results in multiple animal studies, a first-in-human clinical trial of 15 patients suffering from chronic refractory angina who
were followed out to six months, and then again at three years post implantation. The six-month results from this clinical trial
were published in the Journal of the American College of Cardiology and three year follow-up data were presented at the annual
scientific meeting of the American College of Cardiology in March 2010. In this clinical trial, implantation of the Reducer resulted
in significant clinical improvements in stress test and perfusion measurements, as well as in overall quality of life in the majority
of the patients at six months and these same results were noted at the three year follow up. During this period, the Reducer remained
patent with no evidence of migration, and symptom relief was maintained in these patients.
The Company completed the COSIRA trial,
a prospective, multicenter, randomized, double-blind, sham-controlled study to assess the safety and effectiveness of the Reducer
device in 2013. The COSIRA trial’s primary endpoint was a two-class improvement in angina symptoms six months after implantation
based on the patients’ ratings on the Canadian Cardiovascular Society “CCS” angina grading scale; a four-class
functional classification that is widely used to characterize the severity of angina symptoms and disability. Only patients with
severe angina, CCS Class III or IV, were enrolled in the COSIRA trial. The COSIRA trial analysis showed that the study met the
primary endpoint, with patients receiving the Reducer achieving a statistically significant improvement in CCS scores (two classes
or better) compared to patients receiving a sham control (18 of 52 [34.6%] of the Reducer patients improved ≥ 2 CCS classes
compared to 8 of 52 [15.4%] of the control patients [p-value = 0.024]). The analysis also showed that patients treated with the
Reducer showed a statistically significant improvement of one or more CCS classes compared to the sham control patients (37 of
52 [71.2%] of the Reducer patients showed this improvement compared to 22 of 52 [42.3%] of the control patients [p-value = 0.003]).
The COSIRA trial results were published in the New England Journal of Medicine in February 2015.
In 2016, Neovasc initiated the REDUCER-I
post market observational study as a multi-center, multi-country, three-arm study collecting long-term data from European patients
implanted with the Reducer. The study is expected to enroll up to 400 patients. Currently, 255 patients have been enrolled across
23 centers that are active in Italy, Germany, Austria, Belgium, the Netherlands, the United Kingdom, Spain and Switzerland.
In 2018 an article by Parikh, et al., was
published in the Journal of the American College of Cardiology (JACC) titled, “First-in-Human Use of Coronary Sinus Reducer
in Patients with Refractory Angina”. This article describes the long-term structural, anatomic, and clinical durability of
the Reducer. Reducers were patent 12 years following implantation, with no signs of strut fractures, dislocation, thrombosis, or
migration, and the sustained improvement in angina class seen at six months and three years, was also maintained at the 12 year
follow-up.
Hundreds of patients have been enrolled
in clinical studies conducted by third-parties across Europe and Israel relating to the Reducer. These studies continue to show
a strong safety profile and positive clinical results that trend closely to the COSIRA randomized study. Many of these studies
have been published and presented in medical forums. It is anticipated that as the commercial use of the Reducer continues to expand,
additional third-party studies, investigations and presentations will be undertaken. If the results from such third-party activities
continue to show positive results from the product, they may provide additional data to support expanded adoption of the Reducer
for the intended patient population. As a result of the clinical evidence from these studies and publications, the Reducer Therapy
has now been recognized in the European Society of Cardiology Guidelines as a treatment option for refractory angina.
Included in the numerous publications of
clinical results since the COSIRA study was published in the New England Journal of Medicine in 2015, a recent publication in the
European Heart Journal by Gallone, et al., on the “Cost-effectiveness of the coronary sinus Reducer and its impact on the
healthcare burden of refractory angina” indicated that the Reducer was consistently cost-effective according to a range of
cost-effectiveness thresholds after just one year of implant.
Following the positive data from the COSIRA
trial, the Company initiated a pilot launch of the Reducer in select European markets in early 2015. The Company has signed distribution
agreements in multiple jurisdictions across Europe. Direct sales are underway in select centers in Germany. Based on the initial
results from the targeted launch, Neovasc has developed an expanded sales plan and strategy for 2020 and beyond. Any sales of the
product in the United States would follow obtaining U.S. regulatory approval, if such approval is granted, as described further
below.
Based on achieving NUB 1 status in Germany
and a general positive reception in the European market, with positive experiences by many physicians from the treatment of their
own patients with the Reducer, we are seeing an increase in adoption of the Reducer therapy in Europe. The commercial progress
for the Reducer in 2019 was encouraging with a 20% increase in revenue compared to 2018.
We are seeing a growing level of enthusiasm
in Europe for the Reducer therapy and we believe that the therapy has significant potential. In order to further accelerate the
penetration of the therapy, we are open to considering strategic alternatives for the Reducer, including potential alliances in
Europe, the United States and the rest of the world.
On June 20, 2018, the Company announced
the first U.S. patient had been implanted with the Reducer under compassionate use. On October 3, 2018, the Company reported the
positive follow-up for this patient noting that the patient was able to walk several miles without any symptoms. The patient has
reduced his use of nitroglycerin from 2-3 times a week to 1 or 2 times per month. A second patient received a Reducer implant under
compassionate use on January 31, 2019 in the U.S. The most recent update from the attending physician indicated that both patients
are doing very well.
On May 6, 2019, the Company announced that
1,000 patients diagnosed with refractory angina have been treated with the Reducer. The Reducer therapy now benefits from medical
evidence spanning 1,000 patients and 14 years of follow up.
On September 3, 2019, the Company announced
that the European Society of Cardiology included Neovasc Reducer in the European Practice Guidelines for the Diagnosis and Management
of Chronic Coronary Syndromes. The Reducer entered at Class 2 B.
On November 1, 2019, the Company announced
it had advised the FDA of its decision to submit a PMA application, and on December 31, 2019, the Company announced the submission
of a PMA to the FDA for the Reducer.
On July 9, 2020, the Company announced
it had received notification of a FDA Circulatory Systems Devices Panel Meeting scheduled for October 27, 2020.
Regulatory Status
The Reducer is approved for sale in Europe,
having received CE Mark designation in November 2011. In preparation for product launch, Neovasc completed development of the commercial-generation
Reducer and the product is currently in commercial scale manufacture.
On November 3, 2017, Neovasc received FDA
approval for a U.S. IDE clinical trial, COSIRA-II (a trial design similar to the COSIRA study). While the principal investigator
and co-principal investigator for this study were already appointed, the Company evaluated the timing for starting such a U.S.
clinical trial, funding being the largest impediment. The cost of this U.S. clinical trial is expected to be approximately $20
million.
On October 10, 2018, the Company announced
that the FDA had granted “Breakthrough Device Designation” for the Reducer. The FDA grants this designation in order
to expedite the development and review of a device that demonstrates compelling potential to provide a more effective treatment
or diagnosis for life-threatening or irreversibly debilitating diseases.
On December 20, 2018, Neovasc filed a comprehensive
Q-Sub submission to the FDA with all available Reducer Clinical evidence, requesting a Sprint FDA discussion meeting. The Neovasc
team, together with two top U.S. Cardiologists, met with the FDA proposing moving forward with a PMA submission using the available
Neovasc clinical evidence including the prospective, multicenter, randomized, double-blind, sham controlled study assessing the
safety and efficacy of the Reducer in 104 patients in the European Union and Canada (COSIRA), a multi-center, multi-country, three-arm
observational post market study (REDUCER-I), and supportive safety and efficacy data from peer-reviewed journals.
On February 20, 2019, the Company announced
that the FDA had informed Neovasc that, despite “Breakthrough Device Designation”, the FDA review team recommended
collection of further pre-market blinded data prior to PMA submission.
On June 26, 2019, the Company and two top
U.S. Cardiologists, met with FDA to further discuss available clinical evidence for the Reducer, to try to reach agreement on potential
options to enter the U.S. Market. FDA provided the Company with guidance towards potential alternate options, including the HDE
pathway for class IV refractory angina patients and/or alternate clinical trial designs for a broader refractory angina patient
population.
Following the Sprint discussion held with
the FDA on October 9, 2019 and weighing all available options a decision was made by the Company to pursue a PMA application for
this Breakthrough medical device. The Company believes that the totality of clinical evidence from the COSIRA study, interim results
from the REDUCER-I European Post-Market study, and multiple independent studies published in peer-reviewed journals, will provide
reasonable assurance of safety and effectiveness to support a PMA. The PMA application was submitted December 30, 2019, with a
request for an Advisory Panel meeting. The Advisory Panel meeting has since been scheduled for October 27, 2020. While any pathway
to U.S. market approval by the FDA carries considerable risk, and there can be no assurance that the PMA will be approved by the
FDA in a timely manner or at all, we believe the full PMA application pathway brings the best chance of success within reasonable
cost and time constraints. While an additional post-market study will most likely be needed and the body of real-world evidence
continues to grow, the Company believes that the clinical evidence already available will be sufficient to not further delay the
availability of this Breakthrough medical device for the treatment of U.S. patients. In the event that the PMA is approved by
the FDA, there can be no assurance that Neovasc will be successful in commencing commercialization of Reducer in the United States
on a timely basis or at all, or of the total addressable market size for Reducer.
RECENT
DEVELOPMENTS
On April 27, 2020, the Company’s
application for the Paycheck Protection Program loan through the U.S. Small Business Administration was approved for approximately
$530,000. This program helps businesses keep their workforce employed during the COVID-19 crisis by providing relief in the form
of a forgivable loan used for payroll costs. The amount is advanced in the form of a loan that is forgivable if the borrowers,
being certain wholly-owned subsidiaries of the Company, allocate the funds principally for the purposes of retaining employees
in the US through the payment of payroll and group health care benefits costs and other expenses in accordance with the loan agreement.
On April 30, 2020, the Nasdaq Hearing Panel
granted the Company’s request for an extension through August 17, 2020 to evidence compliance with the $35 million MLVS requirement
for continued listing on the Nasdaq.
On May 6, 2020, the Company appointed John
Panton, formerly the VP, Quality to Chief Quality Officer effective immediately.
On May 26, 2020, the Company announced
the offering of the 2020 Notes and May 2020 Warrants, the warrant exchange transaction, repayment of the 2017 Notes and a settlement
agreement between the Company and a certain investor pursuant to which the Company issued the Settlement Warrants.
On May 27, 2020, the Company announced
that it has filed for CE Mark for its Tiara TA Transapical mitral valve replacement system.
On June 4, 2020, the Company announced
that the Company issued a 2020 Note in the principal amount US$1 million. Following the earlier issuance of the 2020 Note in the
principal amount of US$4 million and the May 2020 Warrants, the Company raised aggregate gross proceeds of US$5 million.
On June 12, 2020 the Company announced
the June Offering, whereby it has entered into definitive agreements with certain healthcare-focused institutional investors for
the sale of an aggregate of 3,883,036 common shares at a purchase price of US$2.97375 per Common Share in a registered direct offering
priced at-the-market under Nasdaq rules for aggregate gross proceeds to the Company of approximately US$11.5 million, before deducting
placement agent’s fees and estimated expenses of the June Offering payable by the Company.
On June 25, 2020 the Company announced
that it received written notification from the Nasdaq notifying the Company that it has regained compliance with the minimum market
value requirement set forth in the rules for continued listing on the Nasdaq.
On July 9, 2020 the Company announced that
it had been informed by the FDA that the Circulatory System Devices Panel of the Medical Devices Advisory Committee will review
the PMA for the Reducer at its October 27, 2020 meeting.
On July 23, 2020 the Company announced
the exercise of 1,424,049 of the May 2020 Warrants for aggregate exercise proceeds to the Company of $3,750,945.07 and partial
repayment of $3,613,341.12 (the “Prepayment”) of the principal of the 2019 Note (as defined herein).
On August 10, 2020 the Company announced
the August Offering, whereby it has entered into definitive agreements with certain healthcare-focused institutional investors
for the sale of an aggregate of 4,532,772 common shares at a purchase price of US$ 2.77575 per Common Share in a registered direct
offering priced at-the-market under Nasdaq rules for aggregate gross proceeds to the Company of approximately US$12.6 million,
before deducting placement agent’s fees and estimated expenses of the August Offering payable by the Company.
RISK
FACTORS
Investing in our
securities is highly speculative and involves significant risks. In addition to the other information included or incorporated
by reference in this prospectus or any applicable prospectus supplement, you should carefully consider the risks described below
before purchasing our securities. If any of the following risks actually occur, our business, financial condition and results of
operations could materially suffer. As a result, the trading price of our securities, including our Common Shares, could decline,
and you might lose all or part of your investment. The risks set out below are not the only risks we face; risks and uncertainties
not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial
condition and results of operations. You should also refer to the other information set forth or incorporated by reference in this
prospectus or any applicable prospectus supplement, including our consolidated financial statements and related notes.
Risks Relating to Our Business
Investors should carefully consider the
risks described under the heading “Risk Factors” in our Annual Report on Form 20-F and our other publicly
filed documents which are incorporated herein by reference, as well as the risk factors described under the heading “Risk
Factors” in any applicable prospectus supplement. See “Documents Incorporated by Reference”.
There is substantial
doubt about our ability to continue as a going concern.
Our audited consolidated financial statements
for the year ended December 31, 2019 were prepared under the assumption that we would continue our operations as a going concern.
Our independent registered public accounting firm has included a “going concern” emphasis of matter paragraph in its
report on our consolidated financial statements as at and for the years ended December 31, 2019, 2018 and 2017. As adjusted for
the proceeds of the May Offering, the June Offering and the August Offering, the Company had approximately $22.6 million in cash
and cash equivalents as at June 30, 2020, which it believes is sufficient to fund operations until approximately the end of the
first quarter of 2021. As a result, the Company will need to obtain substantial additional debt or equity financing in 2021 to
fund ongoing operations, in particular the further development of its medical devices. The Company can give no assurance that it
will be able to raise the additional funds needed, on terms agreeable to the Company, or at all. These circumstances indicate the
existence of material uncertainty and cast substantial doubt about the Company’s ability to continue as a going concern.
The audited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The recent coronavirus
outbreak or other health epidemics could significantly impact our operations, sales or ability to raise capital.
In December 2019, a novel strain of coronavirus,
COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United
States, Canada, and several European countries. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic.
If COVID-19 continues to spread in Canada, the United States and elsewhere, we may experience disruptions that could adversely
impact our business. The spread of COVID-19 has disrupted global healthcare and healthcare regulatory systems which could divert
healthcare resources away from the development of our products. It is unknown how long disruptions could continue. Additionally,
COVID-19’s spread, which has had a broad global impact, including restrictions on travel and quarantine polices put into
place by businesses and governments, may materially affect us economically by causing disruptions in our supply chain or other
business operations. As the global outbreak of COVID-19 continues to rapidly evolve, the extent to which COVID-19 may impact our
business will depend on future developments, which are highly uncertain and cannot be predicted.
Risks Relating to the Offering
Volatility of Market
Price of our Common Shares
The market prices for the securities of
medical device companies, including our own, have historically been highly volatile. The market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating performance of any particular company. In addition,
because of the nature of our business, certain factors such as our announcements, competition from new therapeutic products or
technological innovations, government regulations, fluctuations in our operating results, results of clinical trials, public concern
regarding the safety of drugs generally, general market conditions and developments in patent and proprietary rights can have
an adverse impact on the market price of our Common Shares. The price of our Common Shares has experienced significant volatility
resulting from the issuance and subsequent exercises or conversions, as applicable, of securities issued in connection with the
Company’s offerings. For example, since July 1, 2019, the closing price of our Common Shares on the TSX has ranged from
a high of C$7.05 to a low of C$1.78 and on the Nasdaq has ranged from a high of U.S.$5.41 to a low of U.S.$1.28.
Any negative change in the public’s
perception of our prospects could cause the price of our securities, including the price of our Common Shares, to decrease dramatically.
Furthermore, any negative change in the public’s perception of the prospects of medical device companies in general or future
exercises or conversions of the securities issued in connection with the Company’s previous financings could depress the
price of our securities, including the price of our Common Shares, regardless of our results. Following declines in the market
price of a company’s securities, securities class-action litigation is often instituted. Litigation of this type, if instituted,
could result in substantial costs and a diversion of our management’s attention and resources.
Future issuances
of equity securities by us or sales by our existing shareholders may cause the price of our securities to fall.
The market price of our equity securities
could decline as a result of issuances of securities by us or sales by our existing shareholders of Common Shares in the market,
or the perception that these sales could occur, during the currency of this prospectus. Sales of our Common Shares by shareholders
pursuant to this prospectus or otherwise might also make it more difficult for us to sell equity securities at a time and price
that we deem appropriate. The price of our Common Shares has experienced significant volatility resulting from the issuance and
subsequent exercises or conversions as applicable, of securities issued in connection with the Company’s previous financings
. For a description of the risks associated with the securities issued pursuant to these financings, the dilution to date and the
potential dilution in the future due to such exercises or conversions, see the Company’s Annual Report on Form 20-F and Management’s
Discussion and Analysis for the quarter ended June 30, 2020, which are incorporated by reference herein. With any additional sale
or issuance of equity securities, including following future exercises of conversions of the securities issued in connection with
the Company’s financings, investors will suffer dilution of their voting power and may experience dilution in earnings per
share.
There is currently
no market through which our securities, other than our Common Shares, may be sold.
There is currently no market through which
our securities, other than our Common Shares, may be sold and, unless otherwise specified in the applicable prospectus supplement,
our preferred shares, debt securities, subscription receipts, units and warrants will not be listed on any securities or stock
exchange or any automated dealer quotation system. As a consequence, purchasers may not be able to resell preferred shares, debt
securities, subscription receipts, units or warrants purchased under this prospectus. This may affect the pricing of our securities,
other than our Common Shares, in the secondary market, the transparency and availability of trading prices, the liquidity of these
securities and the extent of issuer regulation. There can be no assurance that an active trading market for our securities, other
than our Common Shares, will develop or, if developed, that any such market will be sustained.
You may be unable
to enforce actions against us, certain of our directors and officers, or the experts named in this prospectus under U.S. federal
securities laws.
We are a company continued under the federal
laws of Canada. Most of our directors and officers, as well as the experts named in this prospectus, reside principally in Canada.
Because all or a substantial portion of our assets and the assets of these persons are located outside of the United States,
it may not be possible for you to effect service of process within the United States upon us or those persons. Furthermore,
it may not be possible for you to enforce against us or those persons in the United States, judgments obtained in U.S. courts
based upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States. There
is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based upon U.S. federal securities
laws and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in actions based upon the civil
liability provisions of the U.S. federal securities laws. Therefore, it may not be possible to enforce those actions against
us, certain of our directors and officers or the experts named in this prospectus.
The debt securities
will be unsecured and will rank equally in right of payment with all of our other future unsecured debt.
The debt securities will be unsecured and
will rank equally in right of payment with all of our other existing and future unsecured debt. The debt securities will be effectively
subordinated to all of our existing and future secured debt, including the outstanding secured convertible notes of the Company
(the “Notes”), to the extent of the assets securing such debt. If we are involved in any bankruptcy, dissolution, liquidation
or reorganization, the secured debt holders would, to the extent of the value of the assets securing the secured debt, be paid
before the holders of unsecured debt securities including the debt securities. In that event, a holder of debt securities may not
be able to recover any principal or interest due to it under the debt securities.
We will have broad
discretion in the use of the net proceeds of an offering of our securities and may not use them to effectively manage our business.
We will have broad discretion over the
use of the net proceeds from an offering of our securities. Because of the number and variability of factors that will determine
our use of such proceeds, our ultimate use might vary substantially from our planned use. You may not agree with how we allocate
or spend the proceeds from an offering of our securities. We may pursue acquisitions, collaborations or clinical trials that do
not result in an increase in the market value of our securities, including the market value of our Common Shares, and may increase
our losses.
We do not intend
to pay dividends in the foreseeable future.
We have never declared or paid any dividends
on our Common Shares. We intend, for the foreseeable future, to retain our future earnings, if any, to finance our commercial activities
and further research and the expansion of our business. The payment of future dividends, if any, will be reviewed periodically
by our board of directors and will depend upon, among other things, conditions then existing including earnings, financial conditions,
cash on hand, financial requirements to fund our commercial activities, development and growth, and other factors that our board
of directors may consider appropriate in the circumstances.
We may be treated
as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences for U.S. investors.
U.S. investors should be aware that
they could be subject to certain adverse U.S. federal income tax consequences in the event that we are classified as a PFIC
for U.S. federal income tax purposes. The determination of whether we are a PFIC for a taxable year depends, in part, on the
application of complex U.S. federal income tax rules, which are subject to differing interpretations, and the determination
will depend on the composition of our income, expenses and assets from time to time and the nature of the activities performed
by our officers and employees. Prospective investors should carefully read the tax discussion in any applicable prospectus supplement
for more information and consult their own tax advisors regarding the likelihood and consequences of the Company being treated
as a PFIC for U.S. federal income tax purposes, including the advisability of making certain elections that may mitigate certain
possible adverse U.S. federal income tax consequences but may result in an inclusion in gross income without receipt of such income.
USE
OF PROCEEDS
Unless we otherwise indicate in a prospectus
supplement, we currently intend to use the net proceeds from the sale of our securities to advance our business objectives outlined
above under “Our Strategy”.
By the nature of its business as specialty
medical device company, the Company had negative operating cash flow for its most recent interim financial period and financial
year. To the extent the Company has negative cashflows in future periods, the Company may use a portion of its proceeds from financing
activities to fund such negative cash flow.
More detailed information regarding the
use of proceeds from the sale of securities, including any determinable milestones at the applicable time, will be described in
any applicable prospectus supplement.
PRIOR
SALES
The following table sets forth information
in respect of the Common Shares that we issued upon the exercise of options granted under our incentive stock option plan during
the twelve-month period preceding the date of this prospectus supplement.
|
Exercise Date
|
|
Number
of
Common Shares
|
|
|
Exercise
Price
|
|
|
January 3, 2020
|
|
|
50
|
|
|
$
|
6.83
|
|
|
Total
|
|
|
50
|
|
|
$
|
6.83
|
|
The following table sets forth information
in respect of options to acquire Common Shares that we granted under our incentive stock option plan during the twelve-month period
preceding the date of this prospectus supplement.
|
Grant Date
|
|
Number of
Options
|
|
|
Grant
Price
|
|
|
January 20, 2020
|
|
|
561,200
|
|
|
|
3.25
|
|
|
June 22, 2020
|
|
|
710,125
|
|
|
$
|
2.42
|
|
|
Total
|
|
|
1,271,325
|
|
|
$
|
2.79
|
|
The following table sets forth information
in respect of the Common Shares that we issued upon the vesting of restricted share units (“RSUs”) granted under our
restricted share unit plan during the twelve-month period preceding the date of this prospectus supplement.
|
Vesting Date
|
|
Number of
Common Shares
|
|
|
N/A
|
|
|
0
|
|
|
Total
|
|
|
0
|
|
The following table sets forth information
in respect of the RSUs that we granted under our restricted share unit plan during the twelve-month period preceding the date of
this prospectus supplement.
|
Grant Date
|
|
Number of
RSUs
|
|
|
December 2, 2019
|
|
|
152,9560
|
|
|
January 23, 2020
|
|
|
110,000
|
|
|
February 20, 2020
|
|
|
220,000
|
|
|
June 22, 2020
|
|
|
293,044
|
|
|
Total
|
|
|
776,000
|
(1)
|
|
|
(1)
|
Of the 776,000RSUs granted, the issuance of 681,594 RSUs is subject to shareholder approval.
|
The following table sets forth information
in respect of securities that we issued, other than on exercise of stock options or the settlement of RSUs as set out above, during
the 12-month period prior to the date of this prospectus supplement.
|
Issuance Date
|
|
Type of Security
|
|
Number of
Securities
|
|
|
Issue
Price
|
|
|
September 19, 2019
|
|
Common Shares issued on conversion of $150,000 of the 2017 Notes
|
|
|
60,483
|
|
|
$
|
2.48
|
|
|
September 20, 2019
|
|
Common Shares issued on conversion of $265,000 of the 2017 Notes
|
|
|
106,228
|
|
|
$
|
2.49
|
|
|
December 31, 2019
|
|
Common Shares issued on conversion of $2,101,000 of the 2017 Notes
|
|
|
751,388
|
|
|
$
|
2.80
|
|
|
December 31, 2019
|
|
Common Shares issued on conversion of $860,000 of the 2017 Notes
|
|
|
307,568
|
|
|
$
|
2.80
|
|
|
January 6, 2020
|
|
Common Shares issued related to A units for January 2020 Financing
|
|
|
1,185,000
|
|
|
$
|
3.47
|
|
|
January 6, 2020
|
|
Common Shares issued related to exercise of pre-funded warrants within B units of January 2020 Financing
|
|
|
441,490
|
|
|
$
|
3.47
|
(1)
|
|
January 7, 2020
|
|
Common Shares issued related to exercise of pre-funded warrants within B units of January 2020 Financing
|
|
|
100,000
|
|
|
$
|
3.47
|
(1)
|
|
January 9, 2020
|
|
Common Shares issued related to exercise of pre-funded warrants within B units of January 2020 Financing
|
|
|
85,000
|
|
|
$
|
3.47
|
(1)
|
|
January 16, 2020
|
|
Common Shares issued related to exercise of pre-funded warrants within B units of January 2020 Financing
|
|
|
500,000
|
|
|
$
|
3.47
|
(1)
|
|
January 17, 2020
|
|
Common Shares issued related to exercise of pre-funded warrants within B units of January 2020 Financing
|
|
|
115,000
|
|
|
$
|
3.47
|
(1)
|
|
May 19, 2020
|
|
Common Shares issued on conversion of $1,001,000 of the 2017 Notes
|
|
|
492,642
|
|
|
$
|
2.03
|
|
|
May 26, 2020
|
|
Common Shares issued in connection with the Exchange Agreement upon exchange of 672,937 warrant issued for the January 2020 Financing
|
|
|
672,937
|
|
|
$
|
2.71
|
|
|
May 26, 2020
|
|
Common Shares issued on conversion of $15,000 of the 2017 Notes
|
|
|
7,383
|
|
|
$
|
2.03
|
|
|
May 28, 2020
|
|
2020 Notes
|
|
$
|
4,000,000
|
|
|
$
|
4,000,000
|
|
|
May 28, 2020
|
|
May 2020 Warrants
|
|
|
2,573,959
|
|
|
|
Nil
|
|
|
May 28, 2020
|
|
Settlement Warrants
|
|
|
500,000
|
|
|
|
Nil
|
|
|
June 3, 2020
|
|
2020 Notes
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
June 16, 2020
|
|
Common Shares issued related to June Units for June Offering
|
|
|
3,883,036
|
|
|
$
|
2.97
|
|
|
July 23, 2020
|
|
Common Shares issued related to May 2020 Warrant Exercise
|
|
|
1,424,049
|
|
|
|
2.634
|
|
|
July 23, 2020
|
|
Prepayment Warrants issued upon prepayment of May 2019 Note
|
|
|
481,778
|
|
|
|
Nil
|
|
|
August 12, 2020
|
|
Common Shares issued related to June Units for August Offering
|
|
|
4,532,772
|
|
|
$
|
2.78
|
|
|
(1)
|
The pre-funded warrants within B units of January 2020 Financing were exercised for a nominal exercise
price of $0.0001 per warrant share.
|
No other Common Shares, preferred shares,
debt securities or warrants, or securities exchangeable or convertible into Common Shares, preferred shares, debt securities or
warrants have been issued during the twelve month period preceding the date of this prospectus.
MARKET
FOR SECURITIES
Our Common Shares are listed on the TSX
in Canada and on the Nasdaq in the United States, under the trading symbol NVCN.
The following table sets forth, for the
periods indicated, the reported high, low and closing prices (in Canadian dollars) and volume traded on the TSX.
|
Month
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
Total Volume
|
|
|
July 2019
|
|
C$
|
6.76
|
|
|
C$
|
3.14
|
|
|
C$
|
3.59
|
|
|
|
299,282
|
|
|
August 2019
|
|
C$
|
4.33
|
|
|
C$
|
3.42
|
|
|
C$
|
3.86
|
|
|
|
217,271
|
|
|
September 2019
|
|
C$
|
4.50
|
|
|
C$
|
3.75
|
|
|
C$
|
3.53
|
|
|
|
357,429
|
|
|
October 2019
|
|
C$
|
5.33
|
|
|
C$
|
4.20
|
|
|
C$
|
4.95
|
|
|
|
137,977
|
|
|
November 2019
|
|
C$
|
5.06
|
|
|
C$
|
3.79
|
|
|
C$
|
4.01
|
|
|
|
72,281
|
|
|
December 2019
|
|
C$
|
11.20
|
|
|
C$
|
3.86
|
|
|
C$
|
7.05
|
|
|
|
374,900
|
|
|
January 2020
|
|
C$
|
5.44
|
|
|
C$
|
3.96
|
|
|
C$
|
4.12
|
|
|
|
602,295
|
|
|
February 2020
|
|
C$
|
4.15
|
|
|
C$
|
3.13
|
|
|
C$
|
3.45
|
|
|
|
383,473
|
|
|
March 2020
|
|
C$
|
3.82
|
|
|
C$
|
1.98
|
|
|
C$
|
2.08
|
|
|
|
262,720
|
|
|
April 2020
|
|
C$
|
5.30
|
|
|
C$
|
1.78
|
|
|
C$
|
3.51
|
|
|
|
571,845
|
|
|
May 2020
|
|
C$
|
4.26
|
|
|
C$
|
3.26
|
|
|
C$
|
3.97
|
|
|
|
172,108
|
|
|
June, 2020
|
|
C$
|
4.50
|
|
|
C$
|
3.10
|
|
|
C$
|
3.25
|
|
|
|
538,435
|
|
|
July, 2020
|
|
C$
|
3.65
|
|
|
C$
|
3.01
|
|
|
C$
|
3.41
|
|
|
|
234,648
|
|
|
August 1 – 11, 2020
|
|
C$
|
4.05
|
|
|
C$
|
3.01
|
|
|
C$
|
3.05
|
|
|
|
196,426
|
|
The following table sets forth, for the
periods indicated, the reported high, low and closing prices (in U.S. dollars) and volume traded on the Nasdaq.
|
Month
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
Total Volume
|
|
|
July 2019
|
|
$
|
5.22
|
|
|
$
|
2.37
|
|
|
$
|
2.78
|
|
|
|
884,294
|
|
|
August 2019
|
|
$
|
3.28
|
|
|
$
|
2.57
|
|
|
$
|
2.87
|
|
|
|
254,247
|
|
|
September 2019
|
|
$
|
4.25
|
|
|
$
|
2.80
|
|
|
$
|
3.84
|
|
|
|
223,841
|
|
|
October 2019
|
|
$
|
4.07
|
|
|
$
|
3.17
|
|
|
$
|
3.91
|
|
|
|
169,696
|
|
|
November 2019
|
|
$
|
3.95
|
|
|
$
|
2.81
|
|
|
$
|
2.98
|
|
|
|
188,945
|
|
|
December 2019
|
|
$
|
8.65
|
|
|
$
|
2.88
|
|
|
$
|
5.41
|
|
|
|
21,532,261
|
|
|
January 2020
|
|
$
|
4.17
|
|
|
$
|
3.03
|
|
|
$
|
3.13
|
|
|
|
2,865,576
|
|
|
February 2020
|
|
$
|
3.22
|
|
|
$
|
2.36
|
|
|
$
|
2.60
|
|
|
|
748,779
|
|
|
March 2020
|
|
$
|
2.85
|
|
|
$
|
1.38
|
|
|
$
|
1.46
|
|
|
|
488,764
|
|
|
April 2020
|
|
$
|
3.86
|
|
|
$
|
1.25
|
|
|
$
|
2.53
|
|
|
|
1,269,962
|
|
|
May 2020
|
|
$
|
3.09
|
|
|
$
|
2.30
|
|
|
$
|
2.88
|
|
|
|
397,655
|
|
|
June, 2020
|
|
$
|
3.37
|
|
|
$
|
2.27
|
|
|
$
|
2.38
|
|
|
|
1,673,227
|
|
|
July, 2020
|
|
$
|
2.71
|
|
|
$
|
2.23
|
|
|
$
|
2.56
|
|
|
|
784,597
|
|
|
August 1 – 11, 2020
|
|
$
|
3.05
|
|
|
$
|
2.25
|
|
|
$
|
2.29
|
|
|
|
859,201
|
|
EARNINGS
COVERAGE
If we offer debt securities having a term
to maturity in excess of one year or preferred shares under this prospectus and any applicable prospectus supplement, the applicable
prospectus supplement will include earnings coverage ratios giving effect to the issuance of such securities.
CONSOLIDATED
CAPITALIZATION
Since June 30, 2020, the date of our financial
statements for the most recently completed financial period, there have been no material changes in our consolidated share and
loan capital other than as outlined under “Prior Sales”. For information on the issuance of shares pursuant to the
exercise of options pursuant to our incentive stock option plan, the issuance of shares pursuant to the vesting of our share unit
plan and exercise or conversion of the Warrants and Notes, see “Prior Sales”.
DESCRIPTION
OF SHARE CAPITAL
Common Shares
The Company is authorized to issue an unlimited
number of Common Shares without par value. As of August 12, 2020, after giving effect to the August Offering, there were 22,146,127
Common Shares issued and outstanding and 2,038,855 Common Shares issuable upon exercise of outstanding stock options and 776,000
Common Shares issuable upon the vesting of RSUs. Taking into account the total number of warrants and principal amount of the notes
remaining outstanding and assuming full exercise of the outstanding warrants and conversion of the notes, the maximum number of
Common Shares issuable would be 12,370,332 representing approximately 56% of Neovasc’s current issued and outstanding number
of Common Shares.
The Common Shares all have equal voting
rights and are entitled to receive notice of any shareholders meeting at which they have the right to vote. Subject to the rights
of any other class of shares, upon any liquidation, dissolution, winding-up or other distribution of the Company’s assets,
the holders of Common Shares are entitled to participate equally.
Dividend Policy
We have not paid any dividends to date
on our Common Shares. We do not currently expect to pay any dividends on our Common Shares for the foreseeable future.
Preferred Shares
The Company is also authorized to issue
an unlimited number of preferred shares, which do not have voting rights and are not entitled to receive notice of any shareholders’
meetings. Upon liquidation, dissolution, winding-up or other distribution of the Company’s assets, the holders of preferred
shares are entitled to participate in priority to the holders of Common Shares. The preferred shares may be issued in series and
the Company’s board of directors may attach special rights, privileges, restrictions or conditions to any preferred shares.
There were no preferred shares issued and outstanding as of August 11, 2020.
DESCRIPTION
OF EXISTING SECURITIES
August 2020 Warrants
In connection with the August
Offering, the Company issued 3,399,579 common share purchase warrants (the “August 2020 Warrants”) in
certificated form. Each whole Warrant entitles the holder to acquire, subject to adjustment as summarized below, one Common
Share at an exercise price of US$2.69 per share on or prior to 5:00 p.m. (New York time) on the fifth year following issuance
of the August 2020 Warrant, after which time the August 2020 Warrant will be void and of no value. The Warrants are
exercisable, at the option of each holder, in whole or in part, by delivering to the Company a duly executed notice of
exercise, thereby canceling all or a portion of such holder’s August 2020 Warrants. The August 2020 Warrants may be
exercised on a “net” or “cashless” basis to the extent that the Company does not have an effective
registration statement registering (or the related prospectus is not available) the shares issuable upon exercise of the
August 2020 Warrants The form of certificate for the August 2020 Warrants (the “Warrant Certificate”) provide
that the number of underlying shares and exercise price of the August 2020 Warrants are subject to adjustment in the event of
certain share dividends or distributions or of a subdivision or consolidation of the Common Shares or similar events.
The Warrant Certificate also provide that,
during the period in which the Warrants are exercisable, it will give notice to holders of August 2020 Warrants of certain stated
events, at least 20 days prior to the record date or effective date, as the case may be, of such events.
In connection with a Fundamental Transaction,
holders of the August 2020 Warrants have the right to receive, upon exercise, the same consideration as holders of Common Shares
in respect of the Common Shares that would be issuable upon exercise of the August 2020 Warrants immediately prior to such Fundamental
Transaction, in addition to any additional consideration receivable by holders of Common Shares in connection with such Fundamental
Transaction. Holders of the August 2020 Warrants also have the option, within 30 days of the closing of a Fundamental Transaction,
to require the Company (or its successor) to repurchase their August 2020 Warrants in cash or, if the Fundamental Transaction is
not in the Company’s control, in the consideration received by other holders of Common Shares in respect of such Fundamental
Transaction, at a value determined by using the Black-Scholes option pricing model.
The Warrant Certificate also contain restrictions
on the number of Common Shares that may be acquired by a holder of August 2020 Warrants upon any exercise of the August 2020 Warrants
that would result in the holder and its affiliates holding in excess of 4.99% (or, at the election of the holder, 9.99%) of the
number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of such August
2020 Warrants, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to us, provided that
any increase in the beneficial ownership limitation shall not be effective until 61 days following notice to us. No fractional
Common Shares is issuable upon the exercise of any August 2020 Warrants. Holders of August 2020 Warrants will not have any voting
or pre-emptive rights or any other rights which a holder of Common Shares would have, except as set forth in the August 2020 Warrants.
August 2020 Broker
Warrants
In connection with the August Offering,
the Company issued 294,630 common share purchase warrants (the “June 2020 Broker Warrants”) at an exercise price of
US$3.46969 per Common Share (equal to 125% of the public offering price for the August Units sold in this August Offering). The
August 2020 Broker Warrants are exercisable immediately for a period of 5 years from August 2020 and are in the same form as the
June 2020 Warrants issued to the investors, except as otherwise required by FINRA. Pursuant to FINRA Rule 5110(g), the June 2020
Broker Warrants and any common shares issued upon the exercise of the June 2020 Broker Warrants shall not be sold, transferred,
assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivate, put or call transaction that would
result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the
date of effectiveness of, or commencement of sales under, the August Offering, except the transfer of any security: (i) by operation
of law or by reason of our reorganization; (ii) to any FINRA member firm participating in the August Offering and the officers
or partners thereof, if all securities so transferred remain subject to this lock-up restriction for the remainder of the time
period; (iii) if the aggregate amount of our securities held by the placement agent or related persons does not exceed 1% of the
securities being offered in the August Offering; (iv) that is beneficially owned on a pro-rata basis by all equity owners of an
investment fund, provided that no participating member manages or otherwise directs investments by the fund and the participating
members in the aggregate do not own more than 10% of the equity in the fund; or (v) issued upon the exercise or conversion of any
security, if all securities remain subject to this lock-up restriction for the remainder of the time period.
July 2020 Prepayment
Warrants
In connection with the Prepayment,
the Company issued 484,310 common share purchase warrants (the “Prepayment Warrants”) with an exercise price
equal to $7.50 per Common Share for any such exercise prior to the second anniversary of the original closing date of May 16,
2019 (the “Closing Date”), $8.50 per Common Share for any such exercise on or after the second anniversary of the
Closing Date but prior to the third anniversary of the Closing Date, and $9.70 per Common Share on or after the third
anniversary of the Closing Date per Common Share until 4:30 p.m. (Vancouver Time) on May 16, 2023. The exercise price is
subject to appropriate adjustment in the event of certain capital reorganization events including a reclassification of the
Company’s Common Shares, a change in the Company’s Common Shares into other shares or securities, a subdivision
or consolidation of the Company’s Common Shares.
June 2020 Warrants
In connection with the June offering, the
Company issued 2,912,277 common share purchase warrants (the “June 2020 Warrants”) in certificated form. Each whole
Warrant entitles the holder to acquire, subject to adjustment as summarized below, one Common Share at an exercise price of US$2.88
per share on or prior to 5:00 p.m. (New York time) on the fifth year following issuance of the June 2020 Warrant, after which time
the June 2020 Warrant will be void and of no value. The June 2020 Warrants were issued under the same terms as the August 2020
Warrants.
June 2020 Broker
Warrants
In connection with the June Offering, the
Company issued 252,397 common share purchase warrants (the “June 2020 Broker Warrants”) at an exercise price of US$3.71719
per Common Share (equal to 125% of the public offering price for the June Units sold in this June Offering). The June 2020 Broker
Warrants are exercisable immediately for a period of 5 years from June 12, 2020 and are in the same form as the June 2020 Warrants
issued to the investors, except as otherwise required by FINRA. The June 2020 Broker Warrants were issued under the same terms
as the August 2020 Warrants.
May 2020 Notes
The 2020 Notes were issued in the aggregate
principal amount of US$4,000,000 on May 28, 2020 pursuant to the securities purchase agreement (the “May 2020 SPA”)
dated May 26, 2020. 2,573,959 May 2020 Warrants were also issued on May 28, 2020 pursuant to the May 2020 SPA. An additional US$1,000,000
in principal amount of 2020 Notes was issued on June 3, 2020. The 2020 Notes will bear interest at the rate of 8% computed on the
basis of a 360-day year and twelve 30-day months and shall be payable in additional 2020 Notes on the date that is six-months after
issuance and on each six-month period thereafter up to, and including, the maturity date. The 2020 Notes will have a maturity date
of 48-months after issuance with a holder’s option for early redemption at 24-months. The 2020 Notes are to be issued at
par and shall rank in senior priority to all other current and future debentures of the Company. The 2020 Notes shall also include
blocking rights to all future proposed debentures of equal or senior priority to the 2020 Notes. Each 2020 Note will be convertible
at the option of the holder of the 2020 Note into Common Shares (the “Conversion Shares”) at a conversion price of
US$2.81525 per Conversion Share.
Upon an event of default, the interest
rate shall automatically be increased by 3% percent per annum. The 2020 Notes are senior to all other indebtedness and secured
by all assets. The terms of the 2020 Notes prohibit a holder from converting its 2020 Notes if doing so would result in such holder
(together with any person acting jointly or in concert with the holder, including such holder’s affiliates) beneficially
owning, or exercising control or direction over more than 9.99% of the number of Common Share outstanding immediately after giving
effect to the conversion, as such percentage ownership is determined in accordance with the terms of the 2020 Notes. The Company
shall not issue any fraction of a share issued upon any conversion. If the issuance would result in the issuance of a fraction
of a share of Common Shares, the Company shall round such fraction of a share of Common Shares down to the nearest whole share.
The 2020 Note holders are entitled to participate
in any dividends or other distributions by the Company and the sale, by the Company, of any options, convertible securities or
rights to purchase stock, warrants, securities or other property pro rata to the holders of Common Shares as if they had converted
their 2020 Notes and were holders of the Conversion Shares. The Company shall not enter into or be party to a Fundamental Transaction
(as defined in the 2020 Note) unless the successor entity assumes in writing all of the obligations of the Company under the 2020
Note and it delivers to each holder of 2020 Notes in exchange for such 2020 Notes a security of the successor entity evidenced
by a written instrument substantially similar in form and substance to the 2020 Notes. Under the 2020 Notes, an event of default
triggers a redemption right.
The 2020 Notes contain certain covenants,
which include: limitations on restricted payments, restrictions on asset transfers (other than ordinary course of business), and
restrictions on cash burn. The 2020 Notes and any Common Shares issued upon conversion of the 2020 Note may be offered, sold, assigned
or transferred by the holder without the consent of the Company.
Upon a change of control the holder may
require the Company to redeem the 2020 Note at a price equal to 125% of the principal amount of the note, decreasing by 10% on
each anniversary of the issuance of the 2020 Note to a price of 100% from the third anniversary of the issuance of the 2020 Note
until maturity. Any amendment to the terms of the 2020 Note shall require the consent of the Company and the Required Holders (as
defined in the 2020 Note), provided that that such limitation shall not apply upon the prior written consent of each such holder
of the 2020 Notes in the event such holder would be treated adversely and disproportionally by such an amendment.
Particulars concerning the Conversion Shares
and shares issuable upon the exercise of the May 2020 Warrants (the “May 2020 Warrant Shares”) are set out under “Description
of Share Capital– Common Shares”.
May 2020 Warrants
The May 2020 Warrants are exercisable at
any time from four years after the date of issuance. The May 2020 Warrants will be exercisable, at the option of each holder. No
fractional warrant shares (the “May 2020 Warrant Shares”) will be issued in connection with the exercise of a May 2020
Warrant. Any entitlement to May 2020 Warrant Shares shall be rounded down to the nearest whole May 2020 Warrant Share. The holder
will not have the right to exercise any portion of the May 2020 Warrant if the holder (together with any acting jointly or in concert
with it, including its affiliates) would beneficially own or exercise control or direction over 9.99% of the number of our Common
Shares outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with
the terms of the May 2020 Warrants. Each May 2020 Warrant represents the right to purchase one May 2020 Warrant Share at an exercise
price equal to US$2.634 per May 2020 Warrant Share, subject to adjustment. The exercise price is subject to appropriate adjustment
in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events
affecting our Common Shares.
If, at the time a holder exercises its
May 2020 Warrant, there is no effective registration statement covering the issuance of the shares underlying the May 2020 Warrant
to the holder, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of
the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number
of Common Shares determined according to a formula set forth in the May 2020 Warrant. The May 2020 Warrant holders are entitled
to participate in any dividends or other distributions by the Company and the sale, by the Company, of any options, convertible
securities or rights to purchase stock, warrants, securities or other property pro rata to the shareholders of the Common Shares
as if they had exercised their May 2020 Warrant and were holders of the May 2020 Warrant Shares. In the event of a Fundamental
Transaction and at the request of the holder of the May 2020 Warrant, the Company must purchase the May 2020 Warrant from such
holder on the date of such request by paying to the holder cash in an amount equal to the value of the unexercised May 2020 Warrants
according to the Black Scholes Option Pricing Model.
Particulars concerning the May 2020 Warrant
Shares are set out under “Description of Share Capital– Common Shares”.
May 2020 Settlement
Warrants
In connection with the settlement
agreement between the Company and certain investors (the “Settlors”) on May 26, 2020 (the “Settlement
Agreement”), the Company issued Settlement Warrants to purchase up to 500,000 Common Shares (the “Settlement
Warrant Shares”). The Settlement Warrants were issued to the Settlors pursuant to the Settlement Agreement, whereby the
Settlors and the Company have agreed to a mutual release and certain rights and obligations as further set forth in the
Settlement Agreement. The Settlement Warrants are exercisable beginning on the date of issuance, and at any time prior to
11:59 p.m. (New York time) on the date that is four years after the date of issuance. The Settlement Warrants will be
exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice, thereby
canceling all or a portion of the Settlement Warrant. No fractional Settlement Warrant Shares will be issued in connection
with the exercise of a Settlement Warrant. Any entitlement to Settlement Warrant Shares shall be rounded down to the nearest
whole Settlement Warrant Share. The holder will not have the right to exercise any portion of the Settlement Warrant if the
holder (together with its affiliates and any other persons acting as a group together with the holder or any of the
holder’s affiliates) would beneficially own in excess of 9.99% of the number of our Common Shares outstanding
immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of
the Settlement Warrants. Each Settlement Warrant represents the right to purchase one Settlement Warrant Share at an exercise
price equal to US$2.634 per Settlement Warrant Share, subject to adjustment. The exercise price is subject to appropriate
adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or
similar events affecting our Common Shares. If the Company issues, sells, or is deemed to have issued or sold, any Common
Shares for less than the exercise price of the Settlement Warrants, the exercise price of the Settlement Warrants will be
reduced to an amount equal to a price determined in accordance with the dilutive issuance formula set out in the Settlement
Warrant.
If, at the time a holder exercises its
Settlement Warrant, there is no effective registration statement covering the issuance of the shares underlying the Settlement
Warrant to the holder, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment
of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net
number of Common Shares determined according to a formula set forth in the Settlement Warrant. The Settlement Warrant holders are
entitled to participate in any dividends or other distributions by the Company and the sale, by the Company, of any options, convertible
securities or rights to purchase stock, warrants, securities or other property pro rata to the shareholders of the Common Shares
as if they had exercised their Settlement Warrant and were holders of the Settlement Warrant Shares. In the event of a Fundamental
Transaction and at the request of the holder of the Settlement Warrant, the Company must purchase the Settlement Warrant from such
holder on the date of such request by paying to the holder cash in an amount equal to the value of the unexercised Settlement Warrants
according to the Black Scholes Option Pricing Model.
The Settlement Agreement imposes the restrictions
on the Settlement Warrants and Settlement Warrant Shares set forth below:
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Until August 12, 2020, the holder may not sell any of the Settlement Warrant Shares unless the
aggregate market value of the Company’s public float of its outstanding equity shares is at least US$75 million (as determined
pursuant to Item I.C. of the General Instructions to Form F-10) for at least one full trading day prior to such date;
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Until August 19, 2020, the holder may not sell any of the Settlement Warrant Shares unless the
Company’s market value of its listed securities is at least US$35 million (as determined pursuant to Nasdaq Listing Rule
5810) (the “MLVS Requirement”) or the Company has received written confirmation from Nasdaq that the Company has regained
compliance with the MVLS Requirement; and
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The holder may not, on any trading day, sell such amount of Settlement Warrant Shares that would
exceed 10% of the total trading volume of the Company’s Common Shares on such trading day.
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Particulars concerning the Settlement Warrant
Shares are set out under “Description of Share Capital– Common Shares”.
January 2020 Warrants
In connection with the January 2020 Financing,
the Company issued 1,185,000 Series A Units and 1,241,490 Series B Units at a price of US$4.1351 per Series A Unit and US$4.135
per Series B Unit. Each Series A Unit is comprised of (i) one Common Share and (ii) one common share purchase warrant (each, a
“January 2020 Warrant”) Each Series B unit is comprised of (i) one pre-funded January Warrant and (ii) one January
2020 Warrant.
The January 2020 Warrants entitle the holder
to acquire, subject to certain adjustments, one Common Share at an exercise price of US$4.1351 per share on or prior to 5:00 p.m.
(New York time) on January 6, 2024. The January 2020 Warrants will be exercisable, at the option of each holder, in whole or in
part, by delivering to the Company a duly executed notice of exercise, thereby canceling all or a portion of the January 2020 Warrant
Holder’s January 2020 Warrants. The January 2020 Warrants may be exercised on a “net” or “cashless”
basis to the extent that the Company does not have an effective registration statement registering (or the related prospectus is
not available) the shares issuable upon exercise of the January 2020 Warrants.
In connection with certain specified mergers,
sales, business combinations, recapitalizations or similar events (a “Fundamental Transaction”), holders of the January
2020 Warrants will have the right to receive, upon exercise, the same consideration as holders of Common Shares in respect of the
Common Shares that would be issuable upon exercise of the January 2020 Warrants immediately prior to such Fundamental Transaction,
in addition to any additional consideration receivable by holders of Common Shares in connection with such Fundamental Transaction.
Holders of the January 2020 Warrants will
also have the option, within 30 days of the closing of a Fundamental Transaction, to require the Company (or its successor) to
repurchase their January 2020 Warrants in cash or, if the Fundamental Transaction is not in the Company’s control, in the
consideration received by other holders of Common Shares in respect of such Fundamental Transaction, at a value determined by using
the Black-Scholes option pricing model.
2020 Broker Warrants
In connection with the January 2020 Financing,
the Company issued common share purchase warrants (the “2020 Broker Warrants”) to purchase up to 157,721 Common Shares
at an exercise price of $5.1689 per Common Share to the underwriter in the January 2020 Financing. The 2020 Broker Warrants are
exercisable immediately and for three years from their dates of issuance. Pursuant to FINRA Rule 5110(g), the 2020 Broker Warrants
and any common shares issued upon the exercise of the 2020 Broker Warrants shall not be sold, transferred, assigned, pledged, or
hypothecated, or be the subject of any hedging, short sale, derivate, put or call transaction that would result in the effective
economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness of,
or commencement of sales under, the relevant January 2020 Financing pursuant to which such 2020 Broker Warrants were issued, except
the transfer of any security: (i) by operation of law or by reason of our reorganization; (ii) to any FINRA member firm participating
in such 2019 financing and the officers or partners thereof, if all securities so transferred remain subject to the Lock up restriction
set forth below for the remainder of the time period; (iii) if the aggregate amount of our securities held by the underwriter in
the relevant January 2020 Financing or related persons does not exceed 1% of the securities being offered in the relevant January
2020 Financing; (iv) that is beneficially owned on a pro rata basis by all equity owners of an investment fund, provided that no
participating member manages or otherwise directs investments by the fund and the participating members in the aggregate do not
own more than 10% of the equity in the fund; or (v) issued upon the exercise or conversion of any security, if all securities remain
subject to the lock up restriction set forth below for the remainder of the time period.
May 2019 Note
Pursuant to the financing conducted in
May 2019 (the “May 2019 Financing”), a secured convertible debenture (the “2019 Notes”) was issued at a
15% original issue discount with a face value of US$11,500,000, for gross proceeds to the Company of $9,775,000. The 2019 Note
is secured by a general security agreement dated as of May 16, 2019 granted by the Company and its subsidiaries to and in favour
of SMG over all of the Company’s present and after-acquired personal property, which includes all of its assets in the U.S.,
Canada and Israel related to Tiara and Reducer. The 2019 Note matures on May 16, 2023 and has the following key terms:
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For the first year after its issuance, interest accrues at a rate of 8%, of which 5% is payable
in cash on or about May 17, 2020. The remainder is deferred and will be due on maturity of the 2019 Note.
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After the first year and until maturity, interest accrues at a rate of 10%, of which 7% is payable
in cash at the end of May and November each year. The remainder is deferred and will be due on maturity of the 2019 Note.
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The 2019 Note was issued at an original discount of $1.725 million. A separate subscription for
Common Shares by the holder of the 2019 Note was made for this amount (at market price) concurrent with the issuance of the 2019
Note.
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The Company has a prepayment option whereby it may voluntarily prepay the 2019 Note prior to maturity.
Prepayment penalties of 3% (if prepaid prior to the 1st anniversary of issuance), 2% (if prepaid between the first and second anniversaries
of issuance) and 1% (if prepaid after the second anniversary) apply.
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The 2019 Note is convertible into Common Shares at the option of the holder (however, the holder
may not own in excess of 19.99% of the total outstanding Common Shares of the Company as a result of the conversion). The conversion
price is $7.50 per common share prior to the second anniversary of issuance, $8.50 between the second and third anniversaries of
issuance and $9.70 after the third anniversary of issuance. The conversion price would also be proportionally adjusted upon any
common share reorganization events, including stock dividends, distributions, stock splits or reverse-stock splits.
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On July 22, 2020, the Company voluntarily
repaid $3,613,341.12 of the 2019 Note, leaving $7,886,658.88 of the principal amount of the 2019 Note outstanding (the “Repayment”).
2019 Broker Warrants
In connection with the financing conducted
in February 2019 (the “February 2019 Financing”), and the financing conducted in March 2019 (the “March 2019
Financing”), the Company issued 144,444 common share purchase warrants (the “2019 Broker Warrants”). The 2019
Broker Warrants are exercisable at a price per Common Share equal to $5.625 for a period of three years following issuance. Pursuant
to FINRA Rule 5110(g), the 2019 Broker Warrants and any common shares issued upon the exercise of the underwriter warrants shall
not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivate, put or call
transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately
following the date of effectiveness of, or commencement of sales under, the February 2019 Financing and the March 2019 Financing,
except the transfer of any security: (i) by operation of law or by reason of our reorganization; (ii) to any FINRA member firm
participating in the February 2019 Financing and the March 2019 Financing and the officers or partners thereof, if all securities
so transferred remain subject to their respective lock-up restrictions for the remainder of the time period; (iii) if the aggregate
amount of our securities held by the holder of such securities or related persons does not exceed 1% of the securities offered
in the February 2019 Financing, in respect of the February 2019 Broker Warrants, or the March 2019 Financing, in respect of the
March 2019 Broker Warrants; (iv) that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided
that no participating member manages or otherwise directs investments by the fund and the participating members in the aggregate
do not own more than 10% of the equity in the fund; or (v) issued upon the exercise or conversion of any security, if all securities
remain subject to the lock-up restriction set forth below for the remainder of the time period.
DESCRIPTION
OF DEBT SECURITIES
In this description of debt securities,
“we”, “us”, “our” or “Neovasc” refer to Neovasc Inc., but not to its subsidiaries.
This section describes the general terms that will apply to any debt securities issued pursuant to this prospectus. We may issue
debt securities in one or more series under an indenture, or the indenture, to be entered into between us and one or more trustees.
The indenture will be subject to and governed by the United States Trust Indenture Act of 1939, as amended (the “Trust
Indenture Act”) and the CBCA. The following description sets forth certain general terms and provisions of the debt securities
and is not intended to be complete. For a more complete description, prospective investors should refer to the indenture and the
terms of the debt securities. If debt securities are issued, we will describe in the applicable prospectus supplement the particular
terms and provisions of any series of the debt securities and a description of how the general terms and provisions described below
may apply to that series of the debt securities. Prospective investors should rely on information in the applicable prospectus
supplement and not on the following information to the extent that the information in such prospectus supplement is different from
the following information.
We may issue debt securities and incur
additional indebtedness other than through the offering of debt securities pursuant to this prospectus.
General
The indenture will not limit the aggregate
principal amount of debt securities that we may issue under the indenture and will not limit the amount of other indebtedness that
we may incur. The indenture will provide that we may issue debt securities from time to time in one or more series and may be denominated
and payable in U.S. dollars, Canadian dollars or any foreign currency. Unless otherwise indicated in the applicable prospectus
supplement, the debt securities will be our unsecured obligations. The indenture will also permit us to increase the principal
amount of any series of the debt securities previously issued and to issue that increased principal amount.
The applicable prospectus supplement for
any series of debt securities that we offer will describe the specific terms of the debt securities and may include, but is not
limited to, any of the following:
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the title of the debt securities;
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the aggregate principal amount of the debt securities;
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the percentage of principal amount at which the debt securities will be issued;
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whether payment on the debt securities will be senior or subordinated to our other liabilities
or obligations;
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whether the payment of the debt securities will be guaranteed by any other person;
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the date or dates, or the methods by which such dates will be determined or extended, on which
we may issue the debt securities and the date or dates, or the methods by which such dates will be determined or extended, on which
we will pay the principal and any premium on the debt securities and the portion (if less than the principal amount) of debt
securities to be payable upon a declaration of acceleration of maturity;
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whether the debt securities will bear interest, the interest rate (whether fixed or variable) or
the method of determining the interest rate, the date from which interest will accrue, the dates on which we will pay interest
and the record dates for interest payments, or the methods by which such dates will be determined or extended;
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the place or places we will pay principal, premium, if any, and interest and the place or places
where debt securities can be presented for registration of transfer or exchange;
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whether and under what circumstances we will be required to pay any additional amounts for withholding
or deduction for Canadian taxes with respect to the debt securities, and whether and on what terms we will have the option to redeem
the debt securities rather than pay the additional amounts;
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whether we will be obligated to redeem or repurchase the debt securities pursuant to any sinking
or purchase fund or other provisions, or at the option of a holder and the terms and conditions of such redemption;
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whether we may redeem the debt securities at our option and the terms and conditions of any such
redemption;
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the denominations in which we will issue any registered debt securities, if other than denominations
of U.S.$1,000 and any multiple of U.S.$l,000 and, if other than denominations of U.S.$5,000, the denominations in which any unregistered
debt security shall be issuable;
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whether we will make payments on the debt securities in a currency or currency unit other than
U.S. dollars or by delivery of our Common Shares or other property;
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whether payments on the debt securities will be payable with reference to any index or formula;
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whether we will issue the debt securities as global securities and, if so, the identity of the
depositary for the global securities;
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whether we will issue the debt securities as unregistered securities (with or without coupons),
registered securities or both;
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the periods within which and the terms and conditions, if any, upon which we may redeem the debt
securities prior to maturity and the price or prices of which and the currency or currency units in which the debt securities are payable;
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any changes or additions to events of default or covenants;
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the applicability of, and any changes or additions to, the provisions for defeasance described
under “Defeasance” below;
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whether the holders of any series of debt securities have special rights if specified events occur;
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any mandatory or optional redemption or sinking fund or analogous provisions;
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the terms, if any, for any conversion or exchange of the debt securities for any other securities;
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rights, if any, on a change of control;
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provisions as to modification, amendment or variation of any rights or terms attaching to the debt
securities; and
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any other terms, conditions, rights and preferences (or limitations on such rights and preferences)
including covenants and events of default which apply solely to a particular series of the debt securities being offered which
do not apply generally to other debt securities, or any covenants or events of default generally applicable to the debt securities
which do not apply to a particular series of the debt securities.
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Unless stated otherwise in the applicable
prospectus supplement, no holder of debt securities will have the right to require us to repurchase the debt securities and there
will be no increase in the interest rate if we become involved in a highly leveraged transaction or we have a change of control.
We may issue debt securities bearing no
interest or interest at a rate below the prevailing market rate at the time of issuance, and offer and sell these securities at
a discount below their stated principal amount. We may also sell any of the debt securities for a foreign currency or currency
unit, and payments on the debt securities may be payable in a foreign currency or currency unit. In any of these cases, we will
describe certain Canadian federal and U.S. federal income tax consequences and other special considerations in the applicable
prospectus supplement.
We may issue debt securities with terms
different from those of debt securities previously issued and, without the consent of the holders thereof, we may reopen a previous
issue of a series of debt securities and issue additional debt securities of such series (unless the reopening was restricted when
such series was created).
Ranking and Other
Indebtedness
Unless otherwise indicated in an applicable
prospectus supplement, our debt securities will be unsecured obligations and will rank equally with all of our other unsecured
and unsubordinated debt from time to time outstanding and equally with other securities issued under the indenture. The debt securities
will be structurally subordinated to all existing and future liabilities, including trade payables, of our subsidiaries.
Our board of directors may establish the
extent and manner, if any, to which payment on or in respect of a series of debt securities will be senior or will be subordinated
to the prior payment of our other liabilities and obligations and whether the payment of principal, premium, if any, and interest,
if any, will be guaranteed by any other person and the nature and priority of any security.
Debt Securities
in Global Form
The Depositary
and Book-Entry
Unless otherwise specified in the applicable
prospectus supplement, a series of the debt securities may be issued in whole or in part in global form as a “global security”
and will be registered in the name of and be deposited with a depositary, or its nominee, each of which will be identified in the
applicable prospectus supplement relating to that series. Unless and until exchanged, in whole or in part, for the debt securities
in definitive registered form, a global security may not be transferred except as a whole by the depositary for such global security
to a nominee of the depositary, by a nominee of the depositary to the depositary or another nominee of the depositary or by the
depositary or any such nominee to a successor of the depositary or a nominee of the successor.
The specific terms of the depositary arrangement
with respect to any portion of a particular series of the debt securities to be represented by a global security will be described
in the applicable prospectus supplement relating to such series. We anticipate that the provisions described in this section will
apply to all depositary arrangements.
Upon the issuance of a global
security, the depositary therefor or its nominee will credit, on its book entry and registration system, the respective
principal amounts of the debt securities represented by the global security to the accounts of such persons, designated as
“participants”, having accounts with such depositary or its nominee. Such accounts shall be designated by the
underwriters, dealers or agents participating in the distribution of the debt securities or by us if such debt securities are
offered and sold directly by us. Ownership of beneficial interests in a global security will be limited to participants or
persons that may hold beneficial interests through participants. Ownership of beneficial interests in a global security will
be shown on, and the transfer of that ownership will be effected only through, records maintained by the depositary therefor
or its nominee (with respect to interests of participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). The laws of some states in the United States may require that
certain purchasers of securities take physical delivery of such securities in definitive form.
So long as the depositary for a global
security or its nominee is the registered owner of the global security, such depositary or such nominee, as the case may be, will
be considered the sole owner or holder of the debt securities represented by the global security for all purposes under the indenture.
Except as provided below, owners of beneficial interests in a global security will not be entitled to have a series of the debt
securities represented by the global security registered in their names, will not receive or be entitled to receive physical delivery
of such series of the debt securities in definitive form and will not be considered the owners or holders thereof under the indenture.
Any payments of principal, premium, if
any, and interest, if any, on global securities registered in the name of a depositary or its nominee will be made to the depositary
or its nominee, as the case may be, as the registered owner of the global security representing such debt securities. None of us,
the trustee or any paying agent for the debt securities represented by the global securities will have any responsibility or liability
for any aspect of the records relating to or payments made on account of beneficial ownership interests of the global security
or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
We expect that the depositary for a global
security or its nominee, upon receipt of any payment of principal, premium, if any, or interest, if any, will credit participants’
accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global
security as shown on the records of such depositary or its nominee. We also expect that payments by participants to owners of beneficial
interests in a global security held through such participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered in “street name”, and will be the
responsibility of such participants.
Discontinuance
of Depositary’s Services
If a depositary for a global security representing
a particular series of the debt securities is at any time unwilling or unable to continue as depositary and a successor depositary
is not appointed by us within 90 days, we will issue such series of the debt securities in definitive form in exchange for
a global security representing such series of the debt securities. If an event of default under the indenture has occurred and
is continuing, debt securities in definitive form will be printed and delivered upon written request by the holder to the trustee.
In addition, we may at any time and in our sole discretion determine not to have a series of the debt securities represented by
a global security and, in such event, will issue a series of the debt securities in definitive form in exchange for all of the
global securities representing that series of debt securities.
Debt Securities
in Definitive Form
A series of the debt securities may be
issued in definitive form, solely as registered securities, solely as unregistered securities or as both registered securities
and unregistered securities. Registered securities will be issuable in denominations of U.S.$1,000 and integral multiples of U.S.$1,000
and unregistered securities will be issuable in denominations of U.S.$5,000 and integral multiples of U.S.$5,000 or, in each case,
in such other denominations as may be set out in the terms of the debt securities of any particular series. Unless otherwise indicated
in the applicable prospectus supplement, unregistered securities will have interest coupons attached.
Unless otherwise indicated in the applicable
prospectus supplement, payment of principal, premium, if any, and interest, if any, on the debt securities (other than global securities)
will be made at the office or agency of the trustee, or at our option we can pay principal, interest, if any, and premium, if any,
by check mailed or delivered to the address of the person entitled at the address appearing in the security register of the trustee
or electronic funds wire or other transmission to an account of the person entitled to receive payments. Unless otherwise indicated
in the applicable prospectus supplement, payment of interest, if any, will be made to the persons in whose name the debt securities
are registered at the close of business on the day or days specified by us.
At the option of the holder of debt securities,
registered securities of any series will be exchangeable for other registered securities of the same series, of any authorized
denomination and of a like aggregate principal amount and tenor. If, but only if, provided in an applicable prospectus supplement,
unregistered securities (with all unmatured coupons, except as provided below, and all matured coupons in default) of any series
may be exchanged for registered securities of the same series, of any authorized denominations and of a like aggregate principal
amount and tenor. In such event, unregistered securities surrendered in a permitted exchange for registered securities between
a regular record date or a special record date and the relevant date for payment of interest shall be surrendered without the coupon
relating to such date for payment of interest, and interest will not be payable on such date for payment of interest in respect
of the registered security issued in exchange for such unregistered security, but will be payable only to the holder of such coupon
when due in accordance with the terms of the indenture. Unless otherwise specified in an applicable prospectus supplement, unregistered
securities will not be issued in exchange for registered securities.
The applicable prospectus supplement may
indicate the places to register a transfer of the debt securities in definitive form. Except for certain restrictions set forth
in the indenture, no service charge will be payable by the holder for any registration of transfer or exchange of the debt securities
in definitive form, but we may, in certain instances, require a sum sufficient to cover any tax or other governmental charges payable
in connection with these transactions.
We shall not be required to:
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issue, register the transfer of or exchange any series of the debt securities in definitive form
during a period beginning at the opening of business 15 days before any selection of securities of that series of the debt
securities to be redeemed and ending on the relevant redemption date if the debt securities for which such issuance, registration
or exchange is requested may be among those selected for redemption;
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register the transfer of or exchange any registered security in definitive form, or portion thereof,
called for redemption, except the unredeemed portion of any registered security being redeemed in part;
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exchange any unregistered security called for redemption except to the extent that such unregistered
security may be exchanged for a registered security of that series and like tenor; provided that such registered security will
be simultaneously surrendered for redemption with written instructions for payment consistent with the provisions of the indenture; or
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issue, register the transfer of or exchange any of the debt securities in definitive form which
have been surrendered for repayment at the option of the holder, except the portion, if any, thereof not to be so repaid.
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Merger, Amalgamation
or Consolidation
The indenture will provide that we may
not consolidate with or amalgamate or merge with or into any other person, enter into any statutory arrangement with any person
or convey, transfer or lease our properties and assets substantially as an entirety to another person, unless among other items:
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we are the surviving person, or the resulting, surviving or transferee person, if other than us,
is organized and existing under the laws of the United States, any state thereof or the District of Columbia, Canada, or any
province or territory thereof, or, if the amalgamation, merger, consolidation, statutory arrangement or other transaction would
not impair the rights of holders, any other country;
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the successor person (if not us) assumes all of our obligations under the debt securities
and the indenture; and
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we or such successor person will not be in default under the indenture immediately after the transaction.
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When such a person assumes our obligations
in such circumstances, subject to certain exceptions, we shall be discharged from all obligations under the debt securities and
the indenture.
Additional Amounts
Unless otherwise specified in the
applicable prospectus supplement, all payments made by or on behalf of us under or with respect to the debt securities will
be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy,
impost, assessment or other government charge (including penalties, interest and other liabilities related thereto) imposed
or levied by or on behalf of the Government of Canada or of any province or territory thereof or by any authority or agency
therein or thereof having power to tax, or Canadian taxes, unless we are required to withhold or deduct Canadian taxes by law
or by the interpretation or administration thereof by the relevant government authority or agency.
If we are so required to withhold or deduct
any amount for or on account of Canadian taxes from any payment made under or with respect to the debt securities, we will pay
as additional interest such additional amounts, or the additional amounts, as may be necessary so that the net amount received
by a holder of the debt securities after such withholding or deduction will not be less than the amount such holder of the debt
securities would have received if such Canadian taxes had not been withheld or deducted (a similar payment will also be made to
holders of the debt securities, other than excluded holders (as defined herein), that are exempt from withholding but required
to pay tax under Part XIII of the Income Tax Act (Canada) (the “ITA”), directly on amounts otherwise subject
to withholding); provided, however, that no additional amounts will be payable with respect to a payment made to a holder of the
debt securities, or an excluded holder, in respect of the beneficial owner thereof:
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with which we do not deal at arm’s length (for purposes of the ITA) at the time of the making
of such payment;
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which is subject to such Canadian taxes by reason of the debt securities holder’s failure
to comply with any certification, identification, information, documentation or other reporting requirement if compliance is required
by law, regulation, administrative practice or an applicable treaty as a precondition to exemption from, or a reduction in the
rate of deduction or withholding of, such Canadian taxes;
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which is subject to such Canadian taxes by reason of the debt securities holder being a resident,
domicile or national of, or engaged in business or maintaining a permanent establishment or other physical presence in or otherwise
having some connection with Canada or any province or territory thereof otherwise than by the mere holding of the debt securities
or the receipt of payments thereunder; or
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which is subject to such Canadian taxes because it is not entitled to the benefit of an otherwise
applicable tax treaty by reason of the legal nature of such holder of the debt securities.
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We will make such withholding or deduction
and remit the full amount deducted or withheld to the relevant authority as and when required in accordance with applicable law.
We will pay all taxes, interest and other liabilities which arise by virtue of any failure of us to withhold, deduct and remit
to the relevant authority on a timely basis the full amounts required in accordance with applicable law. We will furnish to the
holder of the debt securities, within 60 days after the date the payment of any Canadian taxes is due pursuant to applicable
law, certified copies of tax receipts evidencing such payment by us.
Whenever in the indenture there is mentioned,
in any context, the payment of principal, premium, if any, interest or any other payment under or with respect to a debt security,
such mention shall be deemed to include mention of the payment of additional amounts to the extent that, in such context, additional
amounts are, were or could be payable in respect thereof.
The foregoing obligations shall survive
any termination, defeasance or discharge of the indenture.
Tax Redemption
If and to the extent specified in the
applicable prospectus supplement, the debt securities of a series will be subject to redemption at any time, in whole but not
in part, at a redemption price equal to the principal amount thereof together with accrued and unpaid interest to the date
fixed for redemption, upon the giving of a notice as described below, if (1) we determine that (a) as a result of
any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Canada or of any political
subdivision or taxing authority thereof or therein affecting taxation, or any change in position regarding application or
interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction), which change
or amendment is announced or becomes effective on or after a date specified in the applicable prospectus supplement if any
date is so specified, we have or will become obligated to pay, on the next succeeding date on which interest is due,
additional amounts with respect to any debt security of such series as described under “Additional Amounts” or
(b) on or after a date specified in the applicable prospectus supplement, any action has been taken by any taxing
authority of, or any decision has been rendered by a court of competent jurisdiction in, Canada or any political subdivision
or taxing authority thereof or therein, including any of those actions specified in (a) above, whether or not such
action was taken or decision was rendered with respect to us, or any change, amendment, application or interpretation shall
be proposed, which, in any such case, in the written opinion to us of legal counsel of recognized standing, will result in
our becoming obligated to pay, on the next succeeding date on which interest is due, additional amounts with respect to any
debt security of such series and (2) in any such case, we, in our business judgment, determine that such obligation
cannot be avoided by the use of reasonable measures available to us; provided however, that (i) no such notice of
redemption may be given earlier than 90 days prior to the earliest date on which we would be obligated to pay such
additional amounts were a payment in respect of the debt securities then due, and (ii) at the time such notice of
redemption is given, such obligation to pay such additional amounts remains in effect. In the event that we elect to redeem
the debt securities of such series pursuant to the provisions set forth in the preceding paragraph, we shall deliver to the
trustee a certificate, signed by an authorized officer, stating that we are entitled to redeem the debt securities of such
series pursuant to their terms.
Provision of Financial
Information
We will file with the trustee, within 20 days
after we file or furnish them with the SEC, copies of our annual reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which we are required to file or furnish
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding that we may not remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and
quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the
SEC, we will continue to provide the trustee:
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within 20 days after the time periods required for the filing or furnishing of such forms
by the SEC, annual reports on Form 40-F or Form 20-F, as applicable, or any successor form; and
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within 20 days after the time periods required for the filing of such forms by the SEC, reports
on Form 6-K (or any successor form), which, regardless of applicable requirements shall, at a minimum, contain such information
required to be provided in quarterly reports under the laws of Canada or any province thereof to security holders of a company
with securities listed on the TSX, whether or not we have any of the debt securities listed on such exchange. Each of such reports,
to the extent permitted by the rules and regulations of the SEC, will be prepared in accordance with Canadian disclosure requirements
and generally accepted accounting principles provided, however, that we shall not be obligated to file or furnish such reports
with the SEC if the SEC does not permit such filings.
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Events of Default
Unless otherwise specified in the applicable
prospectus supplement relating to a particular series of debt securities, the following is a summary of events which will, with
respect to any series of the debt securities, constitute an event of default under the indenture with respect to the debt securities
of that series:
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we fail to pay principal of, or any premium on, any debt security of that series when it is due
and payable;
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we fail to pay interest or any additional amounts payable on any debt security of that series when
it becomes due and payable, and such default continues for 30 days;
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we fail to make any required sinking fund or analogous payment for that series of debt securities;
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we fail to observe or perform any of the covenants described in the section “— Merger,
Amalgamation or Consolidation” for a period of 30 days;
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we fail to comply with any of our other agreements in the indenture that affect or are applicable
to the debt securities for 60 days after written notice by the trustee or to us and the trustee by holders of at least 25%
in aggregate principal amount of the outstanding debt securities of any series affected thereby;
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a default (as defined in any indenture or instrument under which we or one of our subsidiaries
has at the time of the indenture relating to this prospectus or will thereafter have outstanding any indebtedness) has occurred
and is continuing, or we or any of our subsidiaries has failed to pay principal amounts with respect to such indebtedness at maturity
and such event of default or failure to pay has resulted in such indebtedness under such indentures or instruments being declared
due, payable or otherwise being accelerated, in either event so that an amount in excess of the greater of U.S.$5,000,000 and 2%
of our shareholders’ equity will be or become due, payable and accelerated upon such declaration or prior to the date on
which the same would otherwise have become due, payable and accelerated, or the accelerated indebtedness, and such acceleration
will not be rescinded or annulled, or such event of default or failure to pay under such indenture or instrument will not be remedied
or cured, whether by payment or otherwise, or waived by the holders of such accelerated indebtedness, then (i) if the accelerated
indebtedness will be as a result of an event of default which is not related to the failure to pay principal or interest on the
terms, at the times, and on the conditions set out in any such indenture or instrument, it will not be considered an event of default
for the purposes of the indenture governing the debt securities relating to this prospectus until 30 days after such indebtedness
has been accelerated, or (ii) if the accelerated indebtedness will occur as a result of such failure to pay principal or interest
or as a result of an event of default which is related to the failure to pay principal or interest on the terms, at the times,
and on the conditions set out in any such indenture or instrument, then (A) if such accelerated indebtedness is, by its terms,
non-recourse to us or our subsidiaries, it will be considered an event of default for purposes of the indenture governing the debt
securities relating to this prospectus; or (B) if such accelerated indebtedness is recourse to us or our subsidiaries, any
requirement in connection with such failure to pay or event of default for the giving of notice or the lapse of time or the happening
of any further condition, event or act under such indenture or instrument in connection with such failure to pay or event of default
will be applicable together with an additional seven days before being considered an event of default for the purposes of the indenture
relating to this prospectus;
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certain events involving our bankruptcy, insolvency or reorganization; and
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any other event of default provided for in that series of debt securities.
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A default under one series of debt securities
will not necessarily be a default under another series. The trustee may withhold notice to the holders of the debt securities of
any default, except in the payment of principal or premium, if any, or interest, if any, if in good faith it considers it in the
interests of the holders to do so.
If an event of default for any series of
debt securities occurs and continues, the trustee or the holders of at least 25% in aggregate principal amount of the debt securities
of that series, subject to any subordination provisions, may require us to repay immediately:
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the entire principal and interest and premium, if any, of the debt securities of the series; or
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if the debt securities are discounted securities, that portion of the principal as is described
in the applicable prospectus supplement.
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If an event of default relates to events
involving our bankruptcy, insolvency or reorganization, the principal of all debt securities will become immediately due and payable
without any action by the trustee or any holder. Subject to certain conditions, the holders of a majority of the aggregate principal
amount of the debt securities of the affected series can rescind this accelerated payment requirement. If debt securities are discounted
securities, the applicable prospectus supplement will contain provisions relating to the acceleration of maturity of a portion
of the principal amount of the discounted securities upon the occurrence or continuance of an event of default.
Other than its duties in case of a
default, the trustee is not obligated to exercise any of the rights or powers that it will have under the indenture at the
request, order or direction of any holders, unless the holders offer the trustee reasonable indemnity. If they provide this
reasonable indemnity, the holders of a majority in aggregate principal amount of any series of debt securities may, subject
to certain limitations, direct the time, method and place of conducting any proceeding or any remedy available to the
trustee, or exercising any power conferred upon the trustee, for any series of debt securities.
We will be required to furnish to the trustee
a statement annually as to our compliance with all conditions and covenants under the indenture and, if we are not in compliance,
we must specify any defaults. We will also be required to notify the trustee as soon as practicable upon becoming aware of any
event of default.
No holder of a debt security of any series
will have any right to institute any proceeding with respect to the indenture, or for the appointment of a receiver or a trustee,
or for any other remedy, unless:
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the holder has previously given to the trustee written notice of a continuing event of default
with respect to the debt securities of the affected series;
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the holders of at least 25% in principal amount of the outstanding debt securities of the series
affected by an event of default have made a written request, and the holders have offered reasonable indemnity, to the trustee
to institute a proceeding as trustee; and
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the trustee has failed to institute a proceeding, and has not received from the holders of a majority
in aggregate principal amount of the outstanding debt securities of the series affected by an event of default a direction inconsistent
with the request, within 60 days after their notice, request and offer of indemnity.
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However, such above-mentioned limitations
do not apply to a suit instituted by the holder of a debt security for the enforcement of payment of the principal of or any premium,
if any, or interest on such debt security on or after the applicable due date specified in such debt security.
Defeasance
When we use the term “defeasance”,
we mean discharge from some or all of our obligations under the indenture. Unless otherwise specified in the applicable prospectus
supplement, if we deposit with the trustee sufficient cash or government securities to pay the principal, interest, if any, premium,
if any, and any other sums due to the stated maturity date or a redemption date of the debt securities of a series, then at our option:
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we will be discharged from the obligations with respect to the debt securities of that series; or
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we will no longer be under any obligation to comply with certain restrictive covenants under the
indenture, and certain events of default will no longer apply to us.
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If this happens, the holders of the debt
securities of the affected series will not be entitled to the benefits of the indenture except for registration of transfer and
exchange of debt securities and the replacement of lost, stolen or mutilated debt securities. These holders may look only to the
deposited fund for payment on their debt securities.
To exercise our defeasance option, we must
deliver to the trustee:
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an opinion of counsel in the United States to the effect that the holders of the outstanding
debt securities of the affected series will not recognize a gain or loss for U.S. federal income tax purposes as a result
of a defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if the defeasance had not occurred;
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an opinion of counsel in Canada or a ruling from the Canada Revenue Agency to the effect that the
holders of the outstanding debt securities of the affected series will not recognize income, or a gain or loss for Canadian federal,
provincial or territorial income or other tax purposes as a result of a defeasance and will be subject to Canadian federal, provincial
or territorial income tax and other tax on the same amounts, in the same manner and at the same times as would have been the case
had the defeasance not occurred; and
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a certificate of one of our officers and an opinion of counsel, each stating that all conditions
precedent provided for relating to defeasance have been complied with.
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If we are to be discharged from our obligations
with respect to the debt securities, and not just from our covenants, the U.S. opinion must be based upon a ruling from or
published by the United States Internal Revenue Service or a change in law to that effect.
In addition to the delivery of the opinions
described above, the following conditions must be met before we may exercise our defeasance option:
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no event of default or event that, with the passing of time or the giving of notice, or both, shall
constitute an event of default shall have occurred and be continuing for the debt securities of the affected series;
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we are not an “insolvent person” within the meaning of applicable bankruptcy and insolvency
legislation; and
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other customary conditions precedent are satisfied.
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Modification and
Waiver
Modifications and amendments of the indenture
may be made by us and the trustee with the consent of the holders of a majority in aggregate principal amount of the outstanding
debt securities of each series affected by the modification. However, without the consent of each holder affected, no modification may:
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change the stated maturity of the principal of, premium, if any, or any installment of interest,
if any, on any debt security;
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reduce the principal, premium, if any, or rate of interest, if any, or any obligation to pay any
additional amounts;
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reduce the amount of principal of a debt security payable upon acceleration of its maturity;
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change the place or currency of any payment;
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affect the holder’s right to require us to repurchase the debt securities at the holder’s
option;
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impair the right of the holders to institute a suit to enforce their rights to payment;
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adversely affect any conversion or exchange right related to a series of debt securities;
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change the percentage of debt securities required to modify the indenture or to waive compliance
with certain provisions of the indenture; or
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reduce the percentage in principal amount of outstanding debt securities necessary to take certain
actions.
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The holders of a majority in principal
amount of outstanding debt securities of any series may on behalf of the holders of all debt securities of that series waive, insofar
as only that series is concerned, past defaults under the indenture and compliance by us with certain restrictive provisions of
the indenture. However, these holders may not waive a default in any payment on any debt security or compliance with a provision
that cannot be modified without the consent of each holder affected.
We may modify the indenture without the
consent of the holders to:
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evidence our successor under the indenture;
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add covenants or surrender any right or power for the benefit of holders;
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provide for unregistered securities to become registered securities under the indenture and make
other such changes to unregistered securities that in each case do not materially and adversely affect the interests of holders
of outstanding securities;
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establish the forms of the debt securities;
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appoint a successor trustee under the indenture;
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add provisions to permit or facilitate the defeasance or discharge of the debt securities as long
as there is no material adverse effect on the holders;
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cure any ambiguity, correct or supplement any defective or inconsistent provision, make any other
provisions in each case that would not materially and adversely affect the interests of holders of outstanding securities and related
coupons, if any;
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comply with any applicable laws of the United States and Canada in order to effect and maintain
the qualification of the indenture under the Trust Indenture Act; or
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change or eliminate any provisions where such change takes effect when there are no securities
outstanding under the indenture.
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Governing Law
The indenture and the debt securities will
be governed by and construed in accordance with the laws of the State of New York.
The Trustee
The trustee under the indenture or its
affiliates may provide banking and other services to us in the ordinary course of their business.
The indenture will contain certain limitations
on the rights of the trustee, as long as it or any of its affiliates remains our creditor, to obtain payment of claims in certain
cases or to realize on certain property received on any claim as security or otherwise. The trustee and its affiliates will be
permitted to engage in other transactions with us. If the trustee or any affiliate acquires any conflicting interest and a default
occurs with respect to the debt securities, the trustee must eliminate the conflict or resign.
Resignation of Trustee
The trustee may resign or be removed with
respect to one or more series of the debt securities and a successor trustee may be appointed to act with respect to such series.
In the event that two or more persons are acting as trustee with respect to different series of debt securities, each such trustee
shall be a trustee of a trust under the indenture separate and apart from the trust administered by any other such trustee, and
any action described herein to be taken by the “trustee” may then be taken by each such trustee with respect to, and
only with respect to, the one or more series of debt securities for which it is trustee.
Consent to Service
In connection with the indenture, we will
designate and appoint CT Corporation System, 111 Eighth Avenue, New York, New York, 10011, as our authorized
agent upon which process may be served in any suit or proceeding arising out of or relating to the indenture or the debt securities
that may be instituted in any U.S. federal or New York state court located in the Borough of Manhattan, in the City of
New York, or brought by the trustee (whether in its individual capacity or in its capacity as trustee under the indenture),
and will irrevocably submit to the non-exclusive jurisdiction of such courts.
Enforceability of
Judgments
Since all or substantially all of our
assets, as well as the assets of some of our directors and officers, are outside the United States, any judgement obtained
in the United States against us or certain of our directors or officers, including judgments with respect to the payment
of principal on the debt securities, may not be collectible within the United States.
We have been advised that the laws of the
Province of British Columbia and the federal laws of Canada applicable therein permit an action to be brought against us in a court
of competent jurisdiction in the Province of British Columbia on any final and conclusive judgment in personam of any federal or
state court located in the State of New York, or a New York Court, which is subsisting and unsatisfied for a sum certain
with respect to the enforcement of the indenture and the debt securities that is not impeachable as void or voidable under the
internal laws of the State of New York if: (1) the New York Court rendering such judgment had jurisdiction over
the judgment debtor, as recognized by the courts of the Province of British Columbia (and submission by us in the indenture
to the jurisdiction of the New York Court will be sufficient for that purpose); (2) proper service of process in respect
of the proceedings in which such judgment was obtained was made in accordance with New York law; (3) such judgment was
not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public
policy, as such terms are understood under the laws of the Province of British Columbia, the federal laws of Canada or contrary
to any order made by the Attorney General of Canada and under the Foreign Extraterritorial Measures Act (Canada) or by the
Competition Tribunal under the Competition Act (Canada); (4) the enforcement of such judgment would not be contrary
to the laws of general application limiting the enforcement of creditors’ rights, including bankruptcy, reorganization, winding
up, moratorium and similar laws, and does not constitute, directly or indirectly, the enforcement of foreign laws which a court
in the Province of British Columbia would characterize as revenue, expropriatory or penal laws; (5) in an action to enforce
a default judgment, the judgment does not contain a manifest error on its face; (6) the action to enforce such judgment is
commenced within the appropriate limitation period; (7) interest payable on the debt securities is not characterized by a
court in the Province of British Columbia as interest payable at a criminal rate within the meaning of Section 347 of the
Criminal Code (Canada); and (8) the judgment does not conflict with another final and conclusive judgment in the same
cause of action; except that a court in the Province of British Columbia may stay an action to enforce a foreign judgment if an
appeal of a judgment is pending or time for appeal has not expired; and except that any court in the Province of British Columbia
may give judgment only in Canadian dollars.
We have been advised that there is doubt
as to the enforceability in Canada by a court in original actions, or in actions to enforce judgments of U.S. courts, of civil
liabilities predicated solely upon the U.S. federal securities laws.
DESCRIPTION
OF WARRANTS
General
This section describes the general terms
that will apply to any warrants for the purchase of Common Shares, or equity warrants, or for the purchase of debt securities,
or debt warrants.
We may issue warrants independently or
together with other securities, and warrants sold with other securities may be attached to or separate from the other securities.
Warrants will be issued under one or more warrant indentures or warrant agency agreements to be entered into by us and one or more
banks or trust companies acting as warrant agent.
This summary of some of the provisions
of the warrants is not complete. The statements made in this prospectus relating to any warrant agreement and warrants to be issued
under this prospectus are summaries of certain anticipated provisions thereof and do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all provisions of the applicable warrant agreement. You should refer to
the warrant indenture or warrant agency agreement relating to the specific warrants being offered for the complete terms of the
warrants. A copy of any warrant indenture or warrant agency agreement relating to an offering or warrants will be filed by us with
the securities regulatory authorities in applicable Canadian offering jurisdictions and the United States after we have entered
into it.
The applicable prospectus supplement relating
to any warrants that we offer will describe the particular terms of those warrants and include specific terms relating to the offering.
Original purchasers of warrants
(if offered separately) will have a contractual right of rescission against us in respect of the exercise of such
warrant. The contractual right of rescission will entitle such original purchasers to receive, upon surrender of the
underlying securities acquired upon exercise of the warrant, the total of the amount paid on original purchase of the warrant
and the amount paid upon exercise, in the event that this prospectus (as supplemented or amended) contains a
misrepresentation, provided that: (i) the exercise takes place within 180 days of the date of the purchase of the
warrant under the applicable prospectus supplement; and (ii) the right of rescission is exercised within 180 days
of the date of purchase of the warrant under the applicable prospectus supplement. This contractual right of rescission will
be consistent with the statutory right of rescission described under section 131 of the Securities Act (British
Columbia), and is in addition to any other right or remedy available to original purchasers under section 131 of the Securities
Act (British Columbia) or otherwise at law.
Original purchasers are further advised
that in certain provinces the statutory right of action for damages in connection with a prospectus misrepresentation is limited
to the amount paid for the security that was purchased under a prospectus, and therefore a further payment at the time of exercise
may not be recoverable in a statutory action for damages. The purchaser should refer to any applicable provisions of the securities
legislation of the purchaser’s province for the particulars of these rights, or consult with a legal advisor.
Equity Warrants
The particular terms of each issue of equity
warrants will be described in the applicable prospectus supplement. This description will include, where applicable:
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the designation and aggregate number of equity warrants;
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the price at which the equity warrants will be offered;
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the currency or currencies in which the equity warrants will be offered;
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the date on which the right to exercise the equity warrants will commence and the date on which the right will expire;
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the number of Common Shares that may be purchased upon exercise of each equity warrant and the price at which and currency or currencies in which the Common Shares may be purchased upon exercise of each equity warrant;
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the terms of any provisions allowing or providing for adjustments in (i) the number and/or class of shares that may be purchased, (ii) the exercise price per share or (iii) the expiry of the equity warrants;
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whether we will issue fractional shares;
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whether we have applied to list the equity warrants or the underlying shares on a stock exchange;
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the designation and terms of any securities with which the equity warrants will be offered, if any, and the number of the equity warrants that will be offered with each security;
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the date or dates, if any, on or after which the equity warrants and the related securities will be transferable separately;
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whether the equity warrants will be subject to redemption and, if so, the terms of such redemption provisions;
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material U.S. and Canadian federal income tax consequences of owning the equity warrants; and
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any other material terms or conditions of the equity warrants.
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Debt Warrants
The particular terms of each issue of debt
warrants will be described in the related prospectus supplement. This description will include, where applicable:
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the designation and aggregate number of debt warrants;
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the price at which the debt warrants will be offered;
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the currency or currencies in which the debt warrants will be offered;
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the designation and terms of any securities with which the debt warrants are being offered, if any, and the number of the debt warrants that will be offered with each security;
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the date or dates, if any, on or after which the debt warrants and the related securities will be transferable separately;
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the principal amount of debt securities that may be purchased upon exercise of each debt warrant and the price at which and currency or currencies in which that principal amount of debt securities may be purchased upon exercise of each debt warrant;
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the date on which the right to exercise the debt warrants will commence and the date on which the right will expire;
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the minimum or maximum amount of debt warrants that may be exercised at any one time;
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whether the debt warrants will be subject to redemption, and, if so, the terms of such redemption provisions;
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material U.S. and Canadian federal income tax consequences of owning the debt warrants; and
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any other material terms or conditions of the debt warrants.
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Prior to the exercise of their warrants,
holders of warrants will not have any of the rights of holders of the securities subject to the warrants.
DESCRIPTION
OF UNITS
Neovasc may issue units, which may consist
of one or more Common Shares, warrants or any combination of securities as is specified in the relevant prospectus supplement.
In addition, the relevant prospectus supplement relating to an offering of units will describe all material terms of any units
offered, including, as applicable:
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the designation and aggregate number of units being offered;
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the price at which the units will be offered;
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the designation, number and terms of the securities comprising the units and any agreement governing the units;
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the date or dates, if any, on or after which the securities comprising the units will be transferable separately;
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whether it will apply to list the units on any exchange;
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material U.S. and Canadian income tax consequences of owning the units, including, how the purchase price paid for the units will be allocated among the securities comprising the units; and
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any other material terms or conditions of the units.
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DESCRIPTION
OF SUBSCRIPTION RECEIPTS
We may issue subscription receipts, which
will entitle holders thereof to receive, upon satisfaction of certain release conditions and for no additional consideration, Common
Shares, warrants or any combination thereof. Subscription receipts will be issued pursuant to one or more subscription receipt
agreements (each, a “Subscription Receipt Agreement”), each to be entered into between the Company and an escrow agent
(the “Escrow Agent”) that will be named in the relevant prospectus supplement. Each Escrow Agent will be a financial
institution organized under the laws of Canada or a province thereof and authorized to carry on business as a trustee. If underwriters
or agents are used in the sale of any subscription receipts, one or more of such underwriters or agents may also be a party to
the subscription agreement governing the subscription receipts sold to or through such underwriter or agent.
The following description sets forth certain
general terms and provisions of subscription receipts that may be issued hereunder and is not intended to be complete. The statements
made in this prospectus relating to any Subscription Receipt Agreement and subscription receipts to be issued thereunder are summaries
of certain anticipated provisions thereof and are subject to, and are qualified in their entirety by reference to, all provisions
of the applicable Subscription Receipt Agreement. Prospective investors should refer to the Subscription Receipt Agreement relating
to the specific subscription receipts being offered for the complete terms of the subscription receipts. We will file a copy
of any Subscription Receipt Agreement relating to an offering of subscription receipts with the securities regulatory authorities
in Canada and the United States after it has entered into it.
General
The prospectus supplement and the Subscription
Receipt Agreement for any subscription receipts that we may offer will describe the specific terms of the subscription receipts
offered. This description may include, but may not be limited to, any of the following, if applicable:
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the designation and aggregate number of subscription receipts being offered;
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the price at which the subscription receipts will be offered;
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the designation, number and terms of the Common Shares, warrants or a combination thereof to be received by the holders of subscription receipts upon satisfaction of the release conditions, and any procedures that will result in the adjustment of those numbers;
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the conditions (the “Release Conditions”) that must be met in order for holders of subscription receipts to receive, for no additional consideration, the Common Shares, warrants or a combination thereof;
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the procedures for the issuance and delivery of the Common Shares, warrants or a combination thereof to holders of subscription receipts upon satisfaction of the Release Conditions;
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whether any payments will be made to holders of subscription receipts upon delivery of the Common Shares, warrants or a combination thereof upon satisfaction of the Release Conditions;
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the identity of the Escrow Agent;
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the terms and conditions under which the Escrow Agent will hold all or a portion of the gross proceeds from the sale of subscription receipts, together with interest and income earned thereon (collectively, the “Escrowed Funds”), pending satisfaction of the Release Conditions;
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the terms and conditions pursuant to which the Escrow Agent will hold Common Shares, warrants or a combination thereof pending satisfaction of the Release Conditions;
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the terms and conditions under which the Escrow Agent will release all or a portion of the Escrowed Funds to the Company upon satisfaction of the Release Conditions;
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if the subscription receipts are sold to or through underwriters or agents, the terms and conditions under which the Escrow Agent will release a portion of the Escrowed Funds to such underwriters or agents in payment of all or a portion of their fees or commissions in connection with the sale of the subscription receipts;
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procedures for the refund by the Escrow Agent to holders of subscription receipts of all or a portion of the subscription price of their subscription receipts, plus any pro rata entitlement to interest earned or income generated on such amount, if the Release Conditions are not satisfied;
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any contractual right of rescission to be granted to initial purchasers of subscription receipts in the event that this prospectus, the prospectus supplement under which subscription receipts are issued or any amendment hereto or thereto contains a misrepresentation;
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any entitlement of Neovasc to purchase the subscription receipts in the open market by private agreement or otherwise;
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whether Neovasc will issue the subscription receipts as global securities and, if so, the identity of the depository for the global securities;
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whether Neovasc will issue the subscription receipts as bearer securities, as registered securities or both;
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provisions as to modification, amendment or variation of the Subscription Receipt Agreement or any rights or terms of the subscription receipts, including upon any subdivision, consolidation, reclassification or other material change of the Common Shares, warrants or other Neovasc securities, any other reorganization, amalgamation, merger or sale of all or substantially all of the Company’s assets or any distribution of property or rights to all or substantially all of the holders of Common Shares;
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whether Neovasc will apply to list the subscription receipts on any exchange;
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material U.S. and Canadian federal income tax consequences of owning the subscription receipts; and
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any other material terms or conditions of the subscription receipts.
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Rights of Holders of Subscription Receipts
Prior to Satisfaction of Release Conditions
The holders of subscription receipts will
not be, and will not have the rights of, shareholders of Neovasc. Holders of subscription receipts are entitled only to receive
Common Shares, warrants or a combination thereof on exchange of their subscription receipts, plus any cash payments, all as provided
for under the Subscription Receipt Agreement and only once the Release Conditions have been satisfied. If the Release Conditions
are not satisfied, holders of subscription receipts shall be entitled to a refund of all or a portion of the subscription price
thereof and all or a portion of the pro rata share of interest earned or income generated thereon, all as provided in the
Subscription Receipt Agreement.
Escrow
The Subscription Receipt Agreement will
provide that the Escrowed Funds will be held in escrow by the Escrow Agent, and such Escrowed Funds will be released to the Company
(and, if the subscription receipts are sold to or through underwriters or agents, a portion of the Escrowed Funds may be released
to such underwriters or agents in payment of all or a portion of their fees in connection with the sale of the subscription receipts)
at the time and under the terms specified by the Subscription Receipt Agreement. If the Release Conditions are not satisfied, holders
of subscription receipts will receive a refund of all or a portion of the subscription price for their subscription receipts, plus
their pro-rata entitlement to interest earned or income generated on such amount, if provided for in the Subscription Receipt Agreement,
in accordance with the terms of the Subscription Receipt Agreement. Common Shares or warrants may be held in escrow by the Escrow
Agent and will be released to the holders of subscription receipts following satisfaction of the Release Conditions at the time
and under the terms specified in the Subscription Receipt Agreement.
Modifications
The Subscription Receipt Agreement will
specify the terms upon which modifications and alterations to the subscription receipts issued thereunder may be made by way of
a resolution of holders of subscription receipts at a meeting of such holders or consent in writing from such holders. The number
of holders of subscription receipts required to pass such a resolution or execute such a written consent will be specified in the
Subscription Receipt Agreement.
The Subscription Receipt Agreement will
also specify that the Company may amend any Subscription Receipt Agreement and the subscription receipts, without the consent of
the holders of the subscription receipts, to cure any ambiguity, to cure, correct or supplement any defective or inconsistent provision,
or in any other manner that will not materially and adversely affect the interests of the holder of outstanding subscription receipts
or as otherwise specified in the Subscription Receipt Agreement.
The foregoing summary of certain of
the principal provisions of the securities is a summary of anticipated terms and conditions only and is qualified in its entirety
by the description in the applicable prospectus supplement under which any securities are being offered.
CERTAIN
INCOME TAX CONSIDERATIONS
The applicable prospectus supplement may
describe certain Canadian federal income tax consequences to an investor who is a non-resident of Canada or to an investor who
is a resident of Canada of acquiring, owning and disposing of any of our securities offered thereunder.
The applicable prospectus supplement may
also describe certain U.S. federal income tax consequences of the acquisition, ownership and disposition of any of our securities
offered thereunder by an initial investor who is a U.S. person (within the meaning of the U.S. Internal Revenue Code),
including, to the extent applicable, such consequences relating to debt securities payable in a currency other than the U.S. dollar,
issued at an original issue discount for U.S. federal income tax purposes or containing early redemption provisions or other
special items.
SELLING
SECURITY-HOLDERS
Our Common Shares may be sold under this
prospectus by way of a secondary offering by or for the account of certain of our security-holders. The prospectus supplement that
we will file in connection with any offering of our Common Shares by selling security-holders will include the following information:
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the names of the selling security-holders;
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the number or amount of our Common Shares owned, controlled or directed by each selling security-holder;
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the number or amount of our Common Shares being distributed for the account of each selling security-holder;
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the number or amount of securities to be owned by the selling security-holders after the distribution and the percentage that number or amount represents of the total number of our outstanding securities; and
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whether our Common Shares are owned by the selling security-holders both of record and beneficially, of record only or beneficially only.
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PLAN
OF DISTRIBUTION
New Issue
We may issue our securities offered by
this prospectus for cash or other consideration (i) to or through underwriters, dealers, placement agents or other intermediaries,
(ii) directly to one or more purchasers or (iii) in connection with acquisitions of assets or shares or another entity
or company.
Each prospectus supplement with respect
to our securities being offered will set forth the terms of the offering, including:
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the name or names of any underwriters, dealers or other placement agents;
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the number and the purchase price of, and form of consideration for, our securities;
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any proceeds to us; and
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any commissions, fees, discounts and other items constituting underwriters’, dealers’ or agents’ compensation.
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Our securities may be sold, from time
to time, in one or more transactions at a fixed price or prices which may be changed or at market prices prevailing at the time
of sale, at prices related to such prevailing market price or at negotiated prices, including sales in transactions that are deemed
to be “at the market distributions” as defined in National
Instrument 44-102 — Shelf Distributions, including sales made directly on the TSX, Nasdaq or other
existing trading markets for the securities. The prices at which the securities may be offered may vary as between purchasers
and during the period of distribution. If, in connection with the offering of securities at a fixed price or prices, the underwriters
have made a bona fide effort to sell all of the securities at the initial offering price fixed in the applicable prospectus
supplement, the public offering price may be decreased and thereafter further changed, from time to time, to an amount not greater
than the initial offering price fixed in such prospectus supplement, in which case the compensation realized by the underwriters
will be decreased by the amount that the aggregate price paid by purchasers for the securities is less than the gross proceeds
paid by the underwriters to the Company.
Only underwriters named in the prospectus
supplement are deemed to be underwriters in connection with our securities offered by that prospectus supplement.
Under agreements which may be entered into
by us, underwriters, dealers and agents who participate in the distribution of our securities may be entitled to indemnification
by us against certain liabilities, including liabilities under the U.S. Securities Act and applicable Canadian securities
legislation, or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in
respect thereof. The underwriters, dealers and agents with whom we enter into agreements may be customers of, engage in transactions
with, or perform services for, us in the ordinary course of business.
No underwriter or dealer involved in an
“at the market distribution” as defined under applicable Canadian securities legislation, no affiliate of such underwriter
or dealer and no person acting jointly or in concert with such underwriter or dealer has over-allotted, or will over allot, our
securities in connection with an offering of our securities or effect any other transactions that are intended to stabilize the
market price of our securities.
In connection with any offering of our
securities, other than an “at the market distribution”, the underwriters may over-allot or effect transactions which
stabilize or maintain the market price of our securities offered at a level above that which might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any time.
Secondary Offering
This prospectus may also, from time to
time, relate to the offering of our Common Shares by certain selling security-holders.
The selling security-holders may sell all
or a portion of our Common Shares beneficially owned by them and offered hereby from time to time directly or through one or more
underwriters, broker-dealers or agents. If our Common Shares are sold through underwriters or broker-dealers, the selling security-holders
will be responsible for underwriting discounts or commissions or agent’s commissions. Our Common Shares may be sold by the
selling security-holders in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions, as follows:
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on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
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in the over-the-counter market;
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in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
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through the writing of options, whether such options are listed on an options exchange or otherwise;
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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sales pursuant to Rule 144 under the U.S. Securities Act;
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broker-dealers may agree with the selling security-holders to sell a specified number of such shares at a stipulated price per share;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
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If the selling security-holders effect
such transactions by selling our Common Shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers
or agents may receive commissions in the form of discounts, concessions or commissions from the selling security-holders or commissions
from purchasers of our Common Shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions
or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions
involved). In connection with sales of our Common Shares or otherwise, the selling security-holders may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of our Common Shares in the course of hedging in positions they assume.
The selling security-holders may also sell our Common Shares short and deliver our Common Shares covered by this prospectus to
close out short positions and to return borrowed shares in connection with such short sales. The selling security-holders may also
loan or pledge our Common Shares to broker-dealers that in turn may sell such shares.
The selling security-holders may pledge
or grant a security interest in some or all of the Common Shares owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell our Common Shares from time to time pursuant to this prospectus
or any supplement to this prospectus filed under General Instruction II.L. of Form F-3 under the U.S. Securities
Act, amending, if necessary, the list of selling security-holders to include, pursuant to a prospectus amendment or prospectus
supplement, the pledgee, transferee or other successors in interest as selling security-holders under this prospectus. The selling
security-holders also may transfer and donate our Common Shares in other circumstances in which case the transferees, donees, pledgees
or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The selling security-holders and any broker-dealer
participating in the distribution of our Common Shares may be deemed to be “underwriters” within the meaning of the
U.S. Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed
to be underwriting commissions or discounts under the U.S. Securities Act. At the time a particular offering of our Common
Shares is made, a prospectus supplement, if required, will be distributed which will identify the selling security-holders and
provide the other information set forth under “Selling Security-holders”, set forth the aggregate amount of our Common
Shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling security-holders and any discounts, commissions or concessions
allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states,
our Common Shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states
our Common Shares may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There can be no assurance that any security-holder
will sell any or all of our Common Shares registered pursuant to this prospectus.
The selling security-holders and any other
person participating in such distribution will be subject to applicable provisions of Canadian securities legislation and the
Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M under the Exchange
Act, which may limit the timing of purchases and sales of any of our Common Shares by the selling security-holders and any other
participating person. Regulation M may also restrict the ability of any person engaged in the distribution of our Common
Shares to engage in market-making activities with respect to our Common Shares. All of the foregoing may affect the marketability
of our Common Shares and the ability of any person or entity to engage in market-making activities with respect to our Common Shares.
AUDITORS,
TRANSFER AGENT AND REGISTRAR
Grant Thornton LLP was reappointed as our
auditor at our annual general meeting of shareholders held on June 4, 2019. Grant Thornton LLP is located at Suite 1600
— 333 Seymour Street, Vancouver, British Columbia, V6B 0A4, Canada. Grant Thornton LLP has reported on our fiscal December 31,
2019, 2018 and 2017 audited consolidated financial statements, which have been filed with the securities regulatory authorities
and incorporated by reference herein. Grant Thornton LLP is independent with respect to the Company within the meaning of the Rules of
Professional Conduct of the Institute of Chartered Professional Accountants of British Columbia.
Our transfer agent and the registrar for
our Common Shares in Canada is Computershare Investor Services Inc. located at 510 Burrard Street, 2nd Floor, Vancouver, British
Columbia, Canada, V6C 3B9 and in the United States is Computershare Trust Company N.A. located at 740 — 350 Indiana St.,
Golden, Colorado, 80401.
LEGAL
MATTERS
Certain legal matters related to the Company’s
securities offered by this prospectus will be passed upon on its behalf by Blake, Cassels & Graydon LLP, with respect
to matters of Canadian law. As of the date of this prospectus, the partners and associates of Blake, Cassels & Graydon
LLP beneficially owns, directly or indirectly, less than 1% of our outstanding Common Shares.
WHERE
YOU CAN FIND MORE INFORMATION
We are required to file with the securities
commission or authority in each of the applicable provinces of Canada annual and quarterly reports, material change reports and
other information. In addition, we are subject to the informational requirements of the Exchange Act, and, in accordance with
the Exchange Act, we also file reports with, and furnish other information to, the SEC. As a foreign private issuer, we are exempt
from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors
and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act. In addition, we are not required to publish financial statements as promptly as U.S. companies. In addition,
we are not required to publish financial statements as promptly as U.S. companies. However, we file with the SEC an annual report
on Form 20-F containing financial statements audited by an independent registered public accounting firm, and submit to the
SEC, on Form 6-K, unaudited quarterly financial information.
You may read any document we file with
or furnish to the securities commissions and authorities of the provinces of Canada through SEDAR and any document we file with,
or furnish to, the SEC at the SEC’s public reference room at Station Place, 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at l-800-SEC-0330 for further information on the public reference rooms. Certain of our filings
are also electronically available on EDGAR, and may be accessed at www.sec.gov.
ENFORCEABILITY
OF CIVIL LIABILITIES
We are a company continued under the CBCA.
Most of our directors and officers, and the experts named in this prospectus, are residents of Canada or otherwise reside outside
the United States, and all or a substantial portion of their assets may be, and a substantial portion of the Company’s
assets are, located outside the United States. We have appointed an agent for service of process in the United States
(as set forth below), but it may be difficult for holders of securities who reside in the United States to effect service
within the United States upon those directors, officers and experts who are not residents of the United States. It may
also be difficult for holders of securities who reside in the United States to realize in the United States upon judgments
of courts of the United States predicated upon our civil liability and the civil liability of our directors, officers and
experts under the United States federal securities laws. We have been advised that a judgment of a U.S. court predicated
solely upon civil liability under U.S. federal securities laws or the securities or “blue sky” laws of any state
within the United States, would likely be enforceable in Canada if the United States court in which the judgment was
obtained has a basis for jurisdiction in the matter that would be recognized by a Canadian court for the same purposes. We have
also been advised, however, that there is substantial doubt whether an action could be brought in Canada in the first instance
on the basis of the liability predicated solely upon U.S. federal securities laws.
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