SOURCE: ViXS Systems Inc.

ViXS Systems Inc.

September 01, 2016 16:29 ET

ViXS Announces Proposed Private Placements of Convertible Debentures and Units; Preliminary Financial Results for Q2 FY2017

Equity Units include Strategic Investors

TORONTO, ON--(Marketwired - September 01, 2016) -

THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT AUTHORIZED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

ViXS Systems Inc. (TSX: VXS) a pioneer and leader in advanced media processing solutions, today announced that its board of directors has authorized the Company to proceed with two non-brokered private placements (collectively, the "Private Placements"), that include a group of strategic investors. The Private Placements consist of:

  • a private placement of secured subordinated convertible debentures (the "Convertible Debenture Private Placement") up to C$4.2 million; and,
  • a private placement of units (the "Unit Private Placement") up to C$3.6 million;

each of which is described in more detail below. The net proceeds from combined financings will be used for general corporate and working capital requirements to support the growth of the business.

The closing of each Private Placement is subject to a number of conditions precedent, including, without limitation, receipt of the approval of the Toronto Stock Exchange ("TSX"). The Unit Private Placement is expected to close by September 8, 2016, while the Convertible Debenture Private Placement is expected to close at the same time or shortly thereafter.

"We are pleased to strengthen our balance sheet and receive support from strategic investors and existing shareholders," said Sohail Khan, President and CEO of ViXS. "This financing further enhances our relationship with existing partnerships, specifically Vecima Networks, a globally recognized leader in leading edge technology for both video and broadband access. We also have received an investment from Suncore, a North American subsidiary of a major Chinese electronics conglomerate that should help advance our strategy for expanding ViXS' footprint in China."

Unit Private Placement

Under the Unit Private Placement, the Company proposes to issue up to 12,000,000 Units at a price of C$0.30 per Unit for gross proceeds of C$3,600,000. Each Unit consists of one common share and 0.25 common share purchase warrants ("Unit Warrants"). Each whole Unit Warrant will enable the holder to acquire one additional common share of the Company at an exercise price of C$0.50 per common share. If all Unit Warrants are exercised, this would result in issuance of an additional 3,000,000 common shares, for additional gross proceeds to the Company of C$1,500,000.

Convertible Debenture Private Placement

Under the Convertible Debenture Private Placement, the Company proposes to issue up to C$4,200,000 in aggregate principal amount of secured subordinated convertible debentures (the "Convertible Debentures"). The Convertible Debentures will mature three years from the date of issuance and bear interest at the rate of 10% per annum, payable semi-annually in arrears in cash, subject to adjustment. Each Convertible Debenture is convertible into common shares of the Company at a conversion price of C$0.35 for each common share, subject to adjustment in certain circumstances (the "Conversion Price"). The maximum number of common shares issuable in connection with the conversion of the Convertible Debentures is 12,000,000.

In connection with the Convertible Debenture Private Placement, the Company will issue up to 3,000,000 common share purchase warrants (the "Convertible Debenture Warrants"). The Convertible Debenture Warrants will enable each investor to purchase that number of common shares that is equal to twenty-five percent (25%) of the number obtained by dividing the principal amount of Convertible Debentures purchased by such investor by the Conversion Price. Each Convertible Debenture Warrant will be exercisable for a period of 12 months from the date of issuance to purchase a common share of the Company at an exercise price of $0.60 per common share. If the market price (as such term is defined in the TSX Company Manual) of a common share of the Company exceeds $0.65 for ten consecutive trading days, each Convertible Debenture Warrant will become exercisable at any time during a period of 20 trading days following the ten-day period. Any Convertible Debenture Warrants not exercised during such warrant acceleration period shall expire.

The Convertible Debentures will be secured by a general security interest in all of the assets of the Company which is subordinated to the security interest of a senior lender to the Company, and to the existing holders of secured debentures of the Company.

A special committee of the Company's board of directors, comprising two independent directors, considered the reasonableness and fairness of each of the Private Placements and unanimously recommended to the Company's board of directors that each of the Private Placements be approved.

Preliminary Financial Results

The Company also provides the preliminary estimates of its financial results for the three months ended July 31, 2016. These preliminary financial results are subject to completion of the Company's customary quarterly closing and review procedures

The Company plans to release its completed financial statements for its fiscal second quarter on September 14, 2016, followed by a conference call with management.

Q2FY17 Preliminary Financial Highlights:

Unless otherwise noted, all figures are in U.S. dollars. The Company expects the following results for its second quarter ended July 31, 2016:

  • Total revenue of approximately $7.5-8.0 million, compared to $5.7 million recognized in the prior quarter.
  • Gross margin for the second quarter of fiscal 2017 of approximately 30-32%, roughly flat with the previous quarter's level of 31.2%.
  • IFRS comprehensive loss for the second quarter of fiscal 2017 of approximately $(2.6)-$(3.0) million, versus a loss of ($3.2) million in the previous quarter.
  • ViXS had approximately $2.2 million in cash and cash equivalents as at July 31, 2016.

About Vecima Networks

Vecima Networks Inc. is a globally recognized leader in creating breakthrough technology solutions that empower network service providers to connect people and enterprises to information and entertainment worldwide. Vecima products for the cable industry allow service providers a cost-effective Last Mile Solution® for both video and broadband access, especially in the demanding business services market segment. Vecima also provides fleet managers the key information and analytics they require to optimally manage their business under the Contigo, NEROglobal, and Fleetlynx brands.

About Suncore

Suncore Photovoltaics, Inc. (Suncore) was founded in 2010 and started as a joint venture between Emcore Corporation and a Chinese conglomerate, now 100% owned by the Chinese conglomerate, is located in Albuquerque, New Mexico. Suncore employs an experienced and knowledgeable team of engineering and business development talents covering everything from solar product development to energy projects, as well as investment management.

About ViXS Systems Inc.

ViXS is a pioneer and market leader in designing revolutionary media processing semiconductor solutions for video over IP streaming solutions, with over 511 patents issued and pending worldwide, numerous industry awards for innovation, and over 33 million media processor shipped to date. ViXS is driving the transition to Ultra HD 4K across the entire content value chain by providing professional and consumer grade chipsets that support the new High Efficiency Video Coding (HEVC) standard up to Main 12 Profile, reducing bandwidth consumption by 50% while providing the depth of color and image clarity needed to take advantage of higher-resolution content. ViXS' XCodePro 300 family is ideal for Ultra HD 4K infrastructure equipment, and the XCode 6000 family of system-on-chip (SoC) products achieve unprecedented levels of integration that enable manufacturers to create cost-effective consumer entertainment devices.

ViXS is headquartered in Toronto, Canada with offices in Europe, Asia and North America. VIXS™, the ViXS® logo, XCode®, XCodePro™, XConnex™ and Xtensiv™ are trademarks and/or registered trademarks of ViXS. Other trademarks are the property of their respective owners. For more information on ViXS, visit our website: www.vixs.com.

FORWARD LOOKING STATEMENTS

Certain statements in this press release which are not historical facts constitute forward-looking statements or information within the meaning of applicable securities laws ("forward-looking statements"). Such statements include, but are not limited to, statements regarding ViXS' projected revenues, gross margins, earnings, growth rates, the impact of new product design wins, market penetration and product plans. The use of terms such as "may", "anticipated", "expected", "projected", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause ViXS' actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Accordingly, there can be no assurance that forward-looking statements will prove to be accurate and readers are therefore cautioned not to place undue reliance upon any such forward-looking statements.

Factors that could cause results or events to differ materially from current expectations expressed or implied by forward looking statements contained herein include, but are not limited to: our history of losses and the risks associated with not achieving or sustaining profitability; the Company's dependence on a limited number of customers for a substantial portion of revenues; fluctuating revenue and expense levels arising from changes in customer demand, sales cycles, product mix, average selling prices, manufacturing costs and timing of product introductions; risks associated with competing against larger and more established companies; competitive risks and pressures from further consoldiation amongst competitors, customers, and suppliers; market share risks and timing of revenue recognition associated with product transitions; risks associated with changing industry standards such as HEVC (High Efficiency Video Codec), HDR (High Dynamic Range) and Ultra HD resolution; risks related to intellectual property, including third party licensing or patent infringement claims; the loss of any of the Company's key personnel could seriously harm its business; risks associated with adverse economic conditions; delays in the launch of customer products; price re-negotiations by existing customers; the Company's dependence on a limited number of supply chain partners for the manufacture of its products, legal proceedings arising from the ordinary course of business; ability to raise needed capital; ongoing liquidity requirements;and other factors discussed in the "Risk Factors" section of the Company's Annual Information Form dated March 31, 2016, a copy of which is available under the Company's profile on SEDAR at www.sedar.com. All forward-looking statements are qualified in their entirety by this cautionary statement. ViXS is providing this information as of the current date and does not undertake any obligation to update any forward-looking statements contained herein as a result of new information, future events or otherwise except as may be required by applicable securities laws.

Contact Information

  • For further information, please contact:

    Charlie Glavin
    ViXS Systems Inc.
    T: +1 416 646-2000
    cglavin@vixs.com

    Investor Relations
    T: +1 416 646-2000 ext. 3
    ir@vixs.com