Prospectus

Transcription

Prospectus

Digital health solutions for the early
detection of breast cancer
Prospectus
Volpara Health Technologies Limited
(New Zealand company number
2206998 / ARBN 609 946 867)
An Offer of 20 million shares at
A$0.50 per share to raise A$10 million.
The Offer is fully underwritten by
Morgans Corporate Limited
(ABN 49 010 669 726 AFSL 235410).
134
Volpara Health Technologies Limited | Prospectus | 2016
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IMPORTANT INFORMATION
This Prospectus is issued by Volpara Health
Technologies Limited (NZ company number 2206998
/ ARBN 609 946 867) (VHT or Company). VHT is a
company incorporated in New Zealand.
The Offer contained in this Prospectus is an invitation
to acquire fully paid ordinary shares (Shares) in VHT.
Lodgement and listing
This Prospectus is dated 24 March 2016 (Prospectus
Date) and a copy was lodged with ASIC on that date.
VHT will apply to ASX within seven days after the
Prospectus Date for admission of the Company to the
Official List and for Official Quotation of its Shares
on ASX. None of ASIC, ASX or their respective
officers take any responsibility for the content of this
Prospectus or for the merits of the investment to which
this Prospectus relates.
Expiry Date
No Shares will be issued or sold on the basis of this
Prospectus after its expiry date, being the date 13
months after the Prospectus Date.
Not investment advice
The information contained in this Prospectus is
not financial product advice and does not take into
account the investment objectives, financial situation
and particular needs (including financial and tax
issues) of any prospective investor. Cooling-off rights
do not apply to an investment in Shares offered
under the Prospectus. This means that, in most
circumstances, you cannot withdraw your Application
once it has been accepted.
It is important that you read this Prospectus carefully
and in its entirety before deciding whether to invest
in the Company. In particular, in considering the
prospects of VHT, you should consider the risk factors
that could affect VHT’s business, financial condition
and results of operations. Some of the key risk factors
that should be considered by prospective investors
are set out in Section 5. You should carefully consider
these risks in light of your investment objectives,
financial situation and particular needs (including
financial and tax issues). There may be risk factors in
addition to these that should be considered in light of
your personal circumstances. If you have any queries
in connection with this Prospectus or in relation to an
investment in the Company, you should seek advice
from your stockbroker, solicitor, accountant, financial
adviser, or other professional adviser before deciding
whether to invest in the Shares.
New Zealand company
VHT is a company incorporated in New Zealand. As
such it is subject to New Zealand law including the New
Zealand Companies Act 1993. Once admitted to the
Official List, VHT will also be subject to the requirements
of the ASX Listing Rules. There are certain differences
between New Zealand law and Australian law that
prospective investors in Australia should be aware of.
Refer to Section 10.5 for further information.
Disclaimer and forward-looking statements
No person is authorised to give any information or
to make any representation in connection with the
Offer which is not contained in this Prospectus. Any
information or representation not so contained may not
be relied on as having been authorised by the Directors
or any other person involved in the preparation of the
Prospectus or the making of the Offer. You should
rely only on information contained in this Prospectus.
Except as required by law, and only to the extent so
required, neither the Company nor any other person
warrants or guarantees the future performance of
the Company, or any return on any investment made
pursuant to this Prospectus.
This Prospectus contains forward-looking statements
which are statements that may be identified by
words such as “may”, “could”, “believes”, “estimates”,
“expects”, “intends” and other similar words that
involve risks and uncertainties. Certain statements,
beliefs and opinions contained in this Prospectus,
particularly those regarding the possible or assumed
future financial or other performance of VHT, industry
growth or other trend projections are or may be
forward-looking statements. These statements are
based on an assessment of present economic and
operating conditions and on a number of best estimate
assumptions regarding future events and actions that,
at the Prospectus Date, are expected to take place.
The Directors and the Lead Manager cannot and do
not give any assurance that the results, performance
or achievements expressed or implied by the forwardlooking statements contained in this Prospectus will
actually occur, and investors are cautioned not to place
undue reliance on these forward-looking statements.
The Company has no intention to update or revise
forward-looking statements, or to publish prospective
financial information in the future, regardless of
whether new information, future events or any other
factors affect the information contained in this
Prospectus, other than to the extent required by law.
This Prospectus, including the industry overview
in Section 2, uses market data, industry forecasts,
research and projections. The Company has obtained
portions of this information from market research and
commentary prepared by third parties. There is no
assurance that any of the forecasts or forward-looking
information contained in the reports, surveys and
research of such third parties that are referred to in
this Prospectus will be achieved. The Company has
not independently verified this information. Estimates
involve risks and uncertainties and are subject to
change based on various factors, including those
discussed in the key risk factors in Section 5.
Currency
Unless otherwise specified, a reference to NZD, NZ$
or $ is a reference to New Zealand dollars. A reference
to AUD or A$ is a reference to Australian dollars.
This is an impor tant document
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New Zealand investors
This offer to New Zealand investors is a regulated
offer made under Australian and New Zealand law. In
Australia, this is Chapter 8 of the Corporations Act and
Corporations Regulations 2001 (Cth) (Regulations). In
New Zealand, this is Part 5 of the Securities Act 1978
and the Securities (Mutual Recognition of Securities
Offerings – Australia) Regulations 2008.
This Offer and the content of the Prospectus are principally
governed by Australian rather than New Zealand law.
In the main, the Corporations Act and Regulations
(Australia) set out how the Offer must be made.
There are differences in how securities are regulated
under Australian law. For example, the disclosure of
fees for collective investment schemes is different
under the Australian regime.
The rights, remedies, and compensation arrangements
available to New Zealand investors in Australian
securities may differ from the rights, remedies and
compensation arrangements for New Zealand securities.
Both the Australian and New Zealand securities
regulators have enforcement responsibilities in
relation to this Offer. If you need to make a complaint
about this Offer, please contact the Financial Markets
Authority, Wellington, New Zealand. The Australian
and New Zealand regulators will work together to
settle your complaint.
The taxation treatment of Australian securities is not
the same as for New Zealand securities.
If you are uncertain about whether this investment is
appropriate for you, you should seek the advice of an
appropriately qualified financial adviser.
The Offer may involve a currency exchange risk.
The currency for the securities is not New Zealand
Dollars. The value of the securities will go up or down
according to changes in the exchange rate between
that currency and New Zealand Dollars. These
changes may be significant.
If you expect the securities to pay any amounts in a
currency that is not New Zealand Dollars, you may
incur significant fees in having the funds credited to a
bank account in New Zealand in New Zealand Dollars.
If the securities are able to be traded on a securities
market and you wish to trade the securities through
that market, you will have to make arrangements for a
participant in that market to sell the securities on your
behalf. If the securities market does not operate in
New Zealand, the way in which the market operates,
the regulation of participants in that market, and the
information available to you about the securities and
trading may differ from securities markets that operate
in New Zealand.
Notice to investors outside Australia and New
Zealand
Please refer to Section 10.15 in relation to the ability
of investors outside Australia and New Zealand to
participate as Applicants in the Offer.
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This Prospectus does not constitute an offer or
invitation in any place in which, or to any person to
whom, it would not be lawful to make such an offer or
invitation. No action has been taken to register or qualify
the Shares or otherwise permit an offering of Shares
in any jurisdiction outside Australia and New Zealand.
The taxation treatment of the securities may not be the
same as those for securities in jurisdictions outside
New Zealand. If you are uncertain about whether this
investment is appropriate for you, you should seek
the advice of your stockbroker, solicitor, accountant,
financial adviser or other professional adviser.
The distribution of this Prospectus outside Australia
and New Zealand may be restricted by law, and
persons who come into possession of this Prospectus
outside of Australia and New Zealand should seek
advice on and observe any such restrictions. Any
failure to comply with such restrictions may constitute
a violation of applicable securities laws. This
Prospectus may not be released or distributed in the
United States.
The Shares described in this Prospectus have not been,
and will not be, registered under the US Securities Act
as amended, or the securities law of any state of the
United States, and may not be offered or sold directly
or indirectly in the United States, other than under an
applicable exemption under federal or state law.
Statements of past performance
This Prospectus includes information regarding the
past performance of VHT. Investors should be aware
that past performance should not be relied upon as
being indicative of future performance of VHT.
Financial information presentation
All financial amounts contained in this Prospectus are
expressed in New Zealand currency unless otherwise
stated. Any discrepancies between totals and sums
and components in tables, figures and diagrams
contained in this Prospectus are due to rounding.
Section 4 sets out in detail the Financial Information
referred to in this Prospectus. The Financial
Information has been prepared in accordance with
Generally Accepted Accounting Practice in New
Zealand (NZ GAAP) which complies with International
Financial Reporting Standards (IFRS) and with
New Zealand equivalents to International Financial
Reporting Standards (NZ IFRS).
The Financial Information is presented in an
abbreviated form insofar as it does not include all
of the presentation and disclosures required by
Australian Accounting Standards and other mandatory
professional reporting requirements applicable
to general purpose financial reports prepared in
accordance with the Corporations Act.
The Financial Information in this Prospectus should be
read in conjunction with, and is qualified by reference
to, the information contained in Section 4.
Unless otherwise stated or implied, all pro forma
data in this Prospectus gives effect to the pro forma
adjustments referred to in Section 4.
All references to FY appearing in this Prospectus are
to the financial years ended or ending (as relevant)
31 March of the applicable year (e.g. FY15 is the year
ended 31 March 2015), unless otherwise indicated.
Readers should be aware that certain financial data
included in this Prospectus is “non-IFRS financial
information” under Regulatory Guide 230 “Disclosing
non-IFRS financial information” published by ASIC.
The Company believes this non-IFRS financial
information provides useful information to users in
measuring the financial performance and condition
of VHT. The non-IFRS financial information does not
have standardised meanings prescribed by Australian
Accounting Standards and, therefore, may not be
comparable to similarly titled measures presented
by other entities, nor should they be construed as an
alternate to other financial information determined in
accordance with Australian Accounting Standards.
Readers are cautioned, therefore, not to place undue
reliance on any non-IFRS financial information or
ratios included in this Prospectus.
Investigating Accountant’s Report on the financial
information and financial services guide
The provider of the Investigating Accountant’s
Report on the Financial Information has provided
Australian Retail Investors with a financial services
guide in relation to its independent review under the
Corporations Act. The Investigating Accountant’s
Report and accompanying Financial Services Guide
are provided in Section 8.
Prospectus availability
A hard copy of the Prospectus is available free of
charge during the Offer Period to any person in
Australia or New Zealand by calling the VHT Offer
Information Line on 1300 737 760 (toll free within
Australia) or +61 2 9290 9600 (outside Australia) from
8.30 am until 5.30 pm (Sydney time) Monday to Friday.
This Prospectus is also available to Australian and
New Zealand resident investors in electronic form
at the Offer website, www.volparasolutions.com/
investors. The Offer constituted by this Prospectus
in electronic form is available only to Australian and
New Zealand residents accessing the website within
Australia and New Zealand. Hard copy and electronic
versions of this Prospectus are generally not available
to persons in other jurisdictions.
Applications
Applications for Shares under this Prospectus
(Application) may only be made during the Offer
Period on the Application Form included in, or
accompanying, this Prospectus in its hard copy form,
or in its electronic form which must be downloaded in
its entirety from www.volparasolutions.com/investors,
together with an electronic copy of this Prospectus
(Application Form). By making an Application, you
declare that you were given access to the Prospectus,
together with an Application Form. The Corporations
Act prohibits any person from passing the Application
Form on to another person unless it is included in, or
accompanied by, this Prospectus in its paper copy
form or the complete and unaltered electronic version
of this Prospectus. Refer to Section 7 for further
information.
As set out in Section 7, it is expected that the Shares
will be admitted to Official Quotation on a normal
settlement basis. To the extent permitted by law, each
of the Company, the Share Registry, and the Lead
Manager disclaim all liability, whether in negligence or
otherwise, to persons who trade Shares before receiving
their holding statement, whether on the basis of a
confirmation of allocation provided by any of them, by the
VHT Offer Information Line, by a Broker or otherwise.
Exposure period
The Corporations Act prohibits the Company from
processing Applications in the seven-day period after
lodgement of this Prospectus with ASIC (Exposure
Period). The Exposure Period may be extended by
ASIC by up to a further seven days. The purpose of
the Exposure Period is to enable the Prospectus to be
examined by market participants prior to the raising of
funds. The examination may result in the identification
of deficiencies in this Prospectus, in which case any
Application may need to be dealt with in accordance
with section 724 of the Corporations Act. Applications
received during the Exposure Period will not be
processed until after the expiry of the Exposure
Period. No preference will be conferred on any
Applications received during the Exposure Period.
During the Exposure Period, this Prospectus will be
made available to Australian residents, without the
Application Forms, at the Company’s website,
www.volparasolutions.com/investors.
Privacy
By completing an Application Form, you are providing
personal information to the Company and the Share
Registry, which is contracted by the Company to
manage Applications. The Company and the Share
Registry on their behalf, collect, hold and use that
personal information to process your Application,
service your needs as a Shareholder, provide
facilities and services that you request and carry out
appropriate administration. If you do not provide the
information requested in the Application Form, the
Company and the Share Registry may not be able to
process or accept your Application.
Once you become a Shareholder, the Corporations Act
and Australian taxation legislation require information
about you (including your name, address and details
of the Shares you hold) to be included in the Share
register. In accordance with the requirements of the
Corporations Act, information on the Share register
will be accessible by members of the public. The
information must continue to be included in the Share
register if you cease to be a Shareholder.
The Company and the Share Registry may disclose
your personal information for purposes related to
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your investment to their agents and service providers
including those listed below or as otherwise authorised
under the Privacy Act 1988 (Cth):
• the Share Registry for ongoing administration of
the Share register;
• the Lead Manager in order to assess your
Application;
• printers and other companies for the purpose of
preparation and distribution of documents and for
handling mail;
• market research companies for the purpose of
analysing the Shareholder base; and
• legal and accounting firms, auditors,
management consultants and other advisers for
the purpose of administering, and advising on,
the Shares and for associated actions.
The Company’s agents and service providers may be
located outside Australia and New Zealand where your
personal information may not receive the same level of
protection as that afforded under Australian and New
Zealand laws.
You may request access to your personal information
held by or on behalf of the Company. You may be
required to pay a reasonable charge to the Share
Registry in order to access your personal information.
You can request access to your personal information
or obtain further information about the Company’s
privacy practices by contacting the Share Registry.
The Company will aim to ensure that the personal
information it retains about you is accurate, complete
and up to date. To assist with this, please contact the
Company or the Share Registry if any of the details
you have provided change.
Photographs and diagrams
Photographs and diagrams used in this Prospectus
that do not have descriptions are for illustration
only and should not be interpreted to mean that any
person shown in them endorses this Prospectus or
its contents or that the assets or products shown in
them are or, on completion of the Offer, will be owned
or supplied by the Company. Diagrams used in this
Prospectus are illustrative only and may not be drawn
to scale. Unless otherwise stated, all data contained
in charts, graphs and tables is based on information
available at the Prospectus Date.
Cover photograph credit: Laura Taylor.
Company website
Any references to documents included on the
Company’s website at www.volparasolutions.com
are provided for convenience only, and none of the
documents or other information available on the
Company’s website, or any other website referred
to in the sources contained in this Prospectus, is
incorporated in this Prospectus by reference.
4
Defined terms and abbreviations
Defined terms and abbreviations used in this
Prospectus, unless specified otherwise, have the
meaning given in the Glossary in Section 11. Unless
otherwise stated or implied, references to times in this
Prospectus are to the time in Sydney, Australia.
Unless otherwise stated or implied, references to
dates or years are calendar year references.
Questions
If you have any questions about this Prospectus or
how to apply for Shares, you should seek advice
from your stockbroker, solicitor, accountant, financial
adviser or other professional adviser. Instructions on
how to apply for Shares are set out in Section 7 of this
Prospectus and on the back of the Application Form.
Alternatively, please contact the VHT Offer Information
Line on 1300 737 760 (toll free within Australia) or +61
2 9290 9600 (outside Australia) between 8:30 am and
5:30 pm (Sydney time), Monday to Friday.
This document is important and should be read in
its entirety.
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TABLE OF CONTENTS
SECTION
page
1
Investment Overview
8
2
Market Overview and Opportunities
19
3
The Company and its Products and Services
25
4
Financial Information
35
5
Risks
48
6
Directors, Key People and Corporate Governance
58
7
Details of the Offer
72
8
Investigating Accountant’s Report
78
9
IP and Patent Report
85
10
Additional Information
107
11
Glossary
123
12
Corporate Directory
127
13
Application Form
129
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KEY DATES AND KEY OFFER DETAILS
KEY EVENT
DATE
Lodgement of the Prospectus with ASIC
Thursday 24th March 2016
Offer opening date
Monday 4th April 2016
Offer closing date
Friday 15th April 2016
Allotment Date
Wednesday 20th April 2016
Dispatch of holding statements
Thursday 21st April 2016
Normal trading of Shares on ASX
Wednesday 27th April 2016
The timetable above is indicative only. VHT, in consultation with the Lead Manager, reserves the right to
amend any or all of these dates subject to the Corporations Act, the ASX Listing Rules and other applicable
laws, including closing the Offer early, extending the Offer, deferring completion of the Offer or accepting
late Applications either generally or in particular cases, allotting Shares at different times to investors, or to
withdrawing the Offer, all without prior notice. The Quotation and commencement of trading of the Shares on
ASX remains subject to confirmation from ASX.
KEY OFFER DETAILS
Company making the Offer
Volpara Health Technologies Limited,
a company registered in New Zealand
with company number 2206998 and
registered in Australia under ARBN 609
946 867
Proposed ASX code
VHT
Securities offered
Ordinary Fully Paid Shares
Offer Price (A$)
$0.50
Number of Shares available under the Offer
20 million Shares
Gross proceeds from the Offer (A$)*
$10 million
Number of Shares held by existing Shareholders
at completion of the Offer
102 million Shares
Total Number of Shares on issue at completion
of the Offer
122 million Shares
Enterprise Value before the Offer (A$)
$51 million
Market capitalisation after the Offer (A$)1
$61 million
* The Offer is fully underwritten by the Lead Manager.
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Based on the Offer Price.
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CHAIRMAN’S LETTER
Dear Investor,
On behalf of the Board of Volpara Health Technologies
traction. In fact, VHT recently signed global distribution deals
Limited (VHT), I am very pleased to present this Prospectus
with GE Healthcare and Siemens Medical Solutions USA, Inc.
and invite you to become a Shareholder in our Company.
This is an exciting time: patients, medical professionals,
VHT helps in the early detection of breast cancer. VHT
researchers, payers and regulators are all recognising the
develops digital health solutions to enable personalised,
importance of quantitative, objective information in the
high-quality breast cancer screening based on objective
screening, diagnosis and treatment of breast cancer. This
measurements of breast density.
paradigm shift to personalised breast cancer screening is
Breast cancer is a major global disease for which there is
no certain cure. The impact is staggering. In developed
countries, 1 in 8 women will be diagnosed with breast
cancer, and in developing countries the rate is rising rapidly.
Economically, the annual global loss due to breast cancer is
an estimated US$88 billion.
Early detection of breast cancer increases a woman’s chance
of survival and saves lives. To this end, approximately 75
million women each year are screened for breast cancer
globally. The main screening technology is mammography,
or breast x-ray, which is primarily used on all women at the
same intervals, regardless of risk profile. However, women with
dense breasts—up to 50% of women in North America—carry
an increased risk of developing breast cancer. Furthermore,
mammography often fails to detect breast cancer in these
women as the dense tissue and cancer both appear white in
mammograms. Radiologists typically estimate breast density
by eye, but this is a subjective process that has been shown
to be unreliable. In the US, the risks associated with breast
density—breast cancer going undetected—have prompted
the passing of laws in 24 states requiring that women must be
informed of their breast density.
Since its inception in 2009, VHT has been dedicated to
producing better, safer screening tools for breast cancer. Built
on more than 80 years of scientific research by its founders,
initially at the University of Oxford, VHT has become a
world leader in automated breast density assessment
and quantitative breast imaging tools—products that help
radiologists provide the most accurate information possible
to the women they serve. Our software helps save lives and
being driven by women demanding better information, better
screening systems, better healthcare and better results.
This is part of a major global trend to apply state-of-the-art
information technology to the health sector. As a leader in
this “digital health” movement in breast screening, VHT has a
unique opportunity—indeed, responsibility—to capitalise on its
market-leading innovations.
The funds raised from new investors will be used by VHT in
four key ways. First, they will further strengthen and expand
our experienced but very small sales team to grow our direct
and channel-based sales of the VHT product range. Second,
they will be used to expand marketing both to health insurers
and to women themselves, in the form of consumer education
and personalised information. Third, they will be used to help
us transition smoothly into a subscription-based revenue
model delivering its software through the Cloud. Finally, they
will be used to help us remain creative and innovative so we
can realise one of our most crucial strategic objectives, to
continue to develop Cloud-based products that open up the
“big data” predictive healthcare and industry-wide analytics
that will help save more lives.
This Prospectus contains a great deal of information about
VHT, its business practices and its relationships within the
healthcare industry, as well as details of the Offer itself. I
urge you to read this document carefully and weigh mindfully
the key risks inherent in an investment of this kind, as
outlined in Section 5. It is important to note that despite
generating revenue, VHT is not yet profitable and the timeline
to profitability is uncertain. I remind you also that past
performance is no guarantee of future performance.
money by facilitating the early detection of breast cancer and
We are excited about the prospect of a world in which the
the efficient operation of breast centres.
screening, diagnosis and treatment of breast cancer are more
VHT’s intellectual property in the measurement of breast
density, compression and radiation dose is deployed through
software that analyses images from x-ray machines installed
in breast centres currently in 34 countries around the world. To
effective, more efficient and less costly. On behalf of the
Board, I look forward to your involvement and support as a
Shareholder in VHT.
Yours sincerely,
date the VHT proprietary software has been used to analyse
the mammograms of over 9 million women. Our technology
is proven; our professional team is world class in the field of
medical physics; and our patent-protected product range is
endorsed by independent, peer-reviewed research. We are
committed to ongoing commercial success, with 127 paying
Roger Allen AM
Chairman
clinical customers across the US, Europe, Australia, New
Zealand and Asia as well as interest from several of the major
x-ray machine manufacturers as testament to our commercial
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INVE S TMENT OVERVIE W
1
INVESTMENT OVERVIEW
The information set out in this Section is intended to be a summary only and should be read in conjunction with the
more detailed information appearing elsewhere in this Prospectus. In deciding whether to apply for Shares under
the Offer, you should read this Prospectus carefully and in its entirety. If you are in doubt as to the course you
should follow, please consult your stockbroker, solicitor, accountant, financial adviser or other professional adviser.
1.1 Volpara Health Technologies Limited – assistance in the early detection of breast cancer
QUESTION
ANSWER
LOCATION
What is the
global toll of
breast cancer?
1 in 8 women will develop breast cancer in their lifetime in the
developed world, and the incidence is rising in the developing world.
Alongside the human toll, the annual economic cost of this disease is
estimated to be US$88 billion.
Section 2
If “one size fits
all” screening
saves lives, why
is it not optimal?
Early detection of breast cancer saves lives by the use of
mammography (breast x-rays) in a screening setting. Each year,
approximately 75 million women are screened globally; the US alone
spends US$7.8 billion on screening. However, “one size fits all”
screening treats all women the same regardless of varying risk profiles.
This approach fails to detect many cancers, generates numerous false
positives, carries the risk of radiation-induced cancers and creates an
uncomfortable experience for many women.
Section 2
Why is breast
density a key
factor in cancer
risk?
The percentage of the breast which is not fatty tissue is known as breast
density. Breast density is linked to both the risk of developing breast
cancer and the risk of a cancer being undetected by mammography
if it is present. It is estimated that 40–50% of women in North America,
and 70–80% of women in parts of Asia, have “dense” breasts.
Section 2
Why is
personalised
breast cancer
screening
based on breast
density?
In the US, a woman’s breast density is now recognised as being so
important that laws are in place in 24 US States (covering over 65%
of women in the US) that dictate that a woman must be informed of
her breast density at the time of mammographic screening so she can
understand its limitations and make an informed decision about further
screening options. Unfortunately, reliable estimation of breast density by
eye is difficult.
Section 2
What is VHT?
VHT develops digital health solutions to enable personalised, highquality breast cancer screening based on objective measurements
of breast density, compression and radiation dose.
Sections
3&4
VHT was founded in 2009 by four of the world’s leading breast imaging
experts: Professor Sir John Michael Brady and Dr Ralph Highnam
from the University of Oxford, Professor Nico Karssemeijer from the
University of Nijmegen and Professor Martin Yaffe from the University of
Toronto. VHT headquarters (R&D and engineering) were established by
Dr Highnam in Wellington, New Zealand. The Volpara Products:
• have US Food and Drug Administration (FDA) and other regulatory
clearances;
• are used in 34 countries;
• have generated over 140 publications; and
• have analysed approximately 9 million women.
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INVESTMENT OVERVIEW
QUESTION
ANSWER
LOCATION
What are the
Volpara Products
and their
benefits?
The Volpara Products are a suite of software applications that include:
Section 3
• VolparaDensity, an automated assessment of a woman’s breast
density from a mammogram from most x-ray vendors. A result is
available within two minutes of the last x-ray, enabling a density
discussion with the woman while she is still in the clinic and, if
necessary, additional imaging such as whole breast ultrasound or
breast MRI.
• VolparaDoseRT, a software application that uses the breast
density to estimate both the radiation dose received by the
breast and the applied compression pressure. This product helps
radiologists and technologists ensure that women are getting
the lowest radiation doses achievable and the most comfortable
examination with the right level of compression, ultimately
increasing patient satisfaction and decreasing risk.
• VolparaAnalytics, a centralised dashboard that presents key
metrics for population, productivity and quality across an entire
network of breast imaging systems to help improve patient care
and clinical outcomes, and enhance profitability of breast centres.
• VolparaServer, the underlying platform on which all of the above
products reside. VolparaServer resides within the hospital network
and communicates with all the various breast x-ray devices and
imaging archiving systems using international standards. Each
VolparaServer can handle up to 12 x-ray devices, and can send to
multiple output devices.
During 2016, a greatly expanded, Cloud-based version of
VolparaAnalytics, called VolparaEnterprise, will be launched,
allowing easier comparisons across all participating breast centres and
facilitating “big data” predictive healthcare and industry-wide analytics.
Who are VHT’s
customers?
Although the end users of the VolparaDensity and VolparaDoseRT
products are radiologists, VHT’s customer is the breast centre
manager making budgetary decisions about workflow, productivity,
quality and safety. Products such as VolparaAnalytics address the
needs of these people directly.
Section 3
Of course, ultimately, the customers of the breast centres are women
themselves. VHT’s products provide timely and accurate information
that help women make informed decisions about their breast care.
As evidenced by the formation of patient advocacy groups such as Are
You Dense? in the US, more and more women are demanding to know
their breast density, thus driving the need for breast centres to have
the Volpara Products.
How does
VHT generate
revenue?
Currently, VHT receives an upfront licence payment and annual
maintenance fees, which vary according to how many x-ray machines
are sending images to VolparaServer. A typical end-user sale could
range from US$30,000 to US$150,000 depending upon the numbers
of x-ray machines and the numbers of software modules selected.
Annually, VHT then typically charges the customer 15% of the price paid
in order to keep supplying them with the latest updates.
The VolparaEnterprise product to be launched in 2016 will follow a
Cloud-based subscription model.
10
Section 3
QUESTION
ANSWER
LOCATION
What is the
size of VHT’s
addressable
market?
VHT estimates that 75 million women are screened globally each
year, at around 10,500 breast centres. Of the 75 million, 39 million are
in the US, where there are 8,700 centres with an average of between 1
and 2 x-ray machines per centre. Outside the US the centres tend to be
much bigger.
Section 3
Today, VHT sells an upfront licence. With an average price of around
US$50,000 to cover the average number of x-ray machines per centre,
the total available market today is estimated to be over A$1 billion.
The total available market will expand. VHT estimates the number of
women to be screened each year will double over the next 10 years.
VHT is transitioning to a Cloud-based subscription business model that
the Directors expect to provide more regular, recurring income into the
future with a revenue stream based more on the number of mammograms
taken each year than on the number of x-ray units on which Volpara
Products are located.
1.2Financials
QUESTION
ANSWER
LOCATION
What is VHT’s
historical financial
performance?
VHT’s product revenues have been growing year on year,
with over $5 million in sales made since launch and over 90% of
sales made in the US. Revenues for FY2015 were $2,409,000,
which amounted to approximately 1% penetration of the US
market. The software nature of the Volpara Products and the fact
that most installations are virtual means that VHT has obtained
approximately 80% gross margins.
Sections
3&4
Further financial information regarding the Company including
the reviewed pro forma statement of financial position following
completion of the Offer is set out in Section 4.
How does VHT
expect to fund its
operations?
VHT expects to fund its operations from new and existing sales
contracts, together with the proceeds of the Offer, then from
the cash flow and profits expected to flow from its expanded
operations in the longer term.
Sections
4&7
What is VHT’s
forecast financial
performance?
The Directors expect growth of the business will result from
planned increased sales and marketing activities, to be partly
funded by the proceeds of the Offer. However, the Directors
have considered ASIC Regulatory Guide 170 and, having regard
to the requirements of this Regulatory Guide and the current
status of the Company, note that any prospective financial
information would contain a broad range of potential outcomes
and possibilities such that the Directors have concluded
the Company cannot include reliable prospective financial
information in this Prospectus.
Section 4
11
1
INVESTMENT OVERVIEW
1.3 Industry competitors
QUESTION
ANSWER
LOCATION
Who are VHT’s
competitors?
VolparaDensity is a multi-vendor software solution, meaning
it is compatible with almost all known x-ray systems to generate
actual physical measurements of breast composition. The Volpara
Products can be retrofitted into virtually any and all current x-ray
machines on the market today.
Section 3
Of the commercial competitors to VolparaDensity in the US with
FDA clearance:
• Hologic, the dominant women’s x-ray company, has a
software add-on, Quantra™, that appears to be compatible
only with Hologic’s x-ray detector.
• Philips has a “spectral” density solution requiring special
hardware on their x-ray system.
• iCAD’s software product, iReveal ®, appears to offer only
a visual-like assessment of the breast image compared to
Volpara’s measurement, which can be used for radiation
dose scoring and other features.
A recent 2016 Frost & Sullivan review of breast density
assessment1 named VHT the global leader, awarding it the
Frost & Sullivan Global Competitive Strategy, Innovation &
Leadership Award for Breast Density Assessment Solutions.
VHT’s leadership position is reflected in the estimated numbers of
publications: 142 for VHT versus 25 for the nearest competitor.
There are currently no direct commercial competitors that
VHT is aware of for VolparaDoseRT or VolparaAnalytics. VHT
believes this to be because such analytics require an accurate
breast density score. In 2014, Frost & Sullivan awarded VHT the
North American Breast Imaging Solutions Technology Innovation
Leadership Award, stating, “For breast-imaging modalities,
Volpara Solutions clearly enjoys the first-mover advantage in
identifying patient-specific dose tracking and reporting as a whitespace opportunity.” 2
12
1
Frost & Sullivan, March 2016.
2
Frost & Sullivan, 17 July 2014.
1.4 VHT’s growth strategy
QUESTION
ANSWER
LOCATION
What are VHT’s
growth strategies?
VHT’s growth is expected to come from four strategies. VHT
intends to:
Section 3
How will the
Company seek to
generate returns for
investors?
1.
build up US and global sales team to take advantage of its
market leading position with VolparaDensity, VolparaDoseRT
and VolparaAnalytics, and build up general sales
infrastructure to support the installed base;
2.
increase marketing and outreach to insurers, referring
physicians, business centre managers and consumer
education programs to women;
3.
launch VolparaEnterprise worldwide and transition over
time to a Cloud-based subscription model; and
4.
continue to innovate and to fast-track products that better
assess the risk of women developing breast cancer and
enable breast centres to operate more efficiently.
The Company will seek to generate returns for investors by selling
existing and new Volpara Products and services into existing and
new markets.
Section 3
1.5 Key investment highlights
QUESTION
ANSWER
LOCATION
Large, high-growth
market
The fundamental market driver is women seeking or requiring breast
cancer screening. VHT anticipates this to grow from 75 million women
as the incidence of breast cancer is expected to double by 2030.
Section 2
Extensive
intellectual property
portfolio
VHT holds extensive intellectual property around VolparaDensity,
including patents on how to make density assessments work reliably
on a variety of x-ray machines, as well as numerous trademarks,
copyright and trade secrets.
Sections
3&9
Clinically validated
VHT has worked extensively with leading researchers around the
world, and its software has been the subject of 142 publications,
including 33 peer-reviewed papers. The Directors believe that no
competitor’s product has been subject to the same level of scrutiny.
Section 3
High barriers to
entry
The market for breast density automation tools is developing rapidly,
but for newcomers there are significant barriers to entry.
Section 3
Though VolparaDensity is a software product, regulatory authorities
consider it to be a medical device and therefore it is subject to strict
regulatory control around the world, such as FDA clearance in the US.
VolparaDensity has achieved regulatory clearance in almost all of the
major territories, including the US, Australia, New Zealand, Canada
and Europe.
VHT’s newer products, VolparaDoseRT and VolparaAnalytics, ideally
need a multi-vendor, volumetric breast assessment product like
VolparaDensity to operate effectively.
13
1
INVESTMENT OVERVIEW
QUESTION
ANSWER
LOCATION
VHT is well
positioned for
growth
VHT has marketed and sold VolparaDensity in a number of States in
the US and has product champions, reference sites and increasingly
active major partners, including GE Healthcare and Siemens Medical
Solutions USA, Inc.
Section 3
VHT has an experienced sales team in place, but needs additional
resources to expand rapidly to service the growing demand, continue to
innovate and launch a subscription service.
Unique product
pipeline
VHT has a unique product pipeline which it will be bringing to market,
including Cloud-based analytics and a product looking at change over
time in the breast. These products will be more naturally subscription
based and are expected to produce recurring revenue.
Section 3
Highly
experienced
management
team
Ralph Highnam, PhD
Chief Executive Officer and Chief Scientist
VHT founder and scientist with 25 years’ experience in digital breast
imaging whose work has commercialised his research at the University
of Oxford.
Section 6
Mark Koeniguer
Chief Commercial Officer
Over 25 years’ international commercial experience spanning marketing,
sales, operations and finance.
Julian Marshall
Chief Marketing Officer
Over 30 years’ medical imaging software experience across marketing,
product management and engineering.
David Murray, PhD
Chief Technology Officer
25 years’ experience in medical imaging and medical device integration
in Europe, the US and NZ.
Brian Leighs
Chief Financial Officer
40 years’ experience in senior financial management with both listed
and start-up companies.
14
QUESTION
ANSWER
LOCATION
Highly
experienced
Board of
Directors
Roger Allen AM
Non-Executive Director and Chairman
Highly experienced entrepreneur and investor in early-stage growth
companies, particularly in IT. Former member of the Prime Minister’s
Science and Technology Council.
Section 6
Dr Ralph Highnam
Executive Director, CEO
VHT founder and scientist with 25 years’ experience in digital breast
imaging whose work has commercialised his research at the University
of Oxford.
Professor Sir John Michael Brady
Non-Executive Director
Veteran entrepreneur, educator, and expert in computer vision, robotics
and medical imaging. Professor of Oncological Imaging at the University
of Oxford.
John Pavlidis
US-based senior executive and company director of multiple companies
in the medical imaging industry.
John Diddams
CPA and public company director experienced in managing the due
diligence and ASX listing processes across diverse industries.
Lyn Swinburne AM
Prominent women’s advocate, breast cancer spokesperson and founder
of Breast Cancer Network Australia. Chair of the Royal Women’s
Hospital in Melbourne.
1.6 Key investment risks
QUESTION
ANSWER
LOCATION
The Company has
a limited operating
history and may
face difficulties
encountered
by companies
early in their
commercialisation
VHT faces risks common to young medical technology companies,
including its ability to implement and execute its business strategy,
expand and improve the productivity of its sales and marketing efforts,
and successfully navigate global regulatory oversight and obtain
further approvals.
Section 5
VHT’s current
business model
depends heavily
on the success of
VolparaDensity
and VHT’s ability
to diversify in the
future
If VHT is unable to achieve meaningful market penetration with
VolparaDensity, its commercial strategy will be unachievable. In
addition, VHT is transitioning from a classic medical device sales
model to a Cloud-based subscription model with tools for business
managers. Such a diversification of its revenue stream will take time
and may not succeed, and may need to be accelerated if the medical
imaging industry’s use of ultrasound declines.
Section 5
15
1
16
INVESTMENT OVERVIEW
QUESTION
ANSWER
LOCATION
Future
profitability
uncertain
As a relatively young company, VHT is not yet profitable and has
incurred losses in each year since incorporation. VHT has achieved
early revenue principally in the US but will need to further penetrate the
international markets, execute its development and growth strategies
and successfully navigate competition and regulatory developments in
order to achieve a sustained profitability. The extent of future profits,
if any, and the time required to achieve a sustained profitability are
uncertain. Moreover, the level of any profitability cannot be predicted.
Section 5
Business
Associate
Agreements
and dealing with
protected health
information
Under the US Health Insurance Portability and Accountability Act of
1996 (HIPAA), VHT is subject to the same obligations relating to the
security of protected health information (PHI) as the hospitals and
clinics with which it has Business Associate Agreements. As such, any
inadvertent disclosure of PHI or breach of confidentiality of PHI while
under the control of VHT or its employees and contractors could lead
to a damages claim and, if the Company is found liable, could have a
material adverse effect on VHT’s reputation and financial performance.
Section 5
Brand and
reputation risk
The reputation and brand of VHT and its products are important in
attracting hospitals, medical clinics, large companies and radiologists to
use VHT’s products. Any reputation damage or negative publicity around
VHT or its products could adversely impact on VHT’s business.
Section 5
VHT is reliant on
the acceptance,
promotion
and usage of
its products
by healthcare
professionals
VHT requires not only regulatory approval and clearance of its
products in the markets in which it operates but also the acceptance
and promotion of its products by healthcare professionals, including
radiologists. Healthcare professionals could be slow to adopt
VHT’s products for reasons such as a preference for the products
of competitors due to familiarity, limited return on investment data
illustrating the cost benefits to healthcare professionals of the use of the
Volpara Products and concern over the potential liability risks involved in
using a new product.
Section 5
Recruitment and
retention of key
personnel
As a relatively young and relatively closely held company, VHT relies
heavily on its existing key management personnel, who have intimate
knowledge of the business, its products and its business model. The
departure of, or inability to attract and retain, key personnel, or inability
to attract quality sales and marketing personnel in the US, Asia and
Europe, could negatively affect VHT’s ability to reach its goals.
Section 5
Potentially
adverse effects
of healthcare
reform legislation
in the US and
other countries
and the impact of
advocacy groups
and sceptics
Recent legislation and many proposed reform bills in the US include
funding to assess the comparative effectiveness of medical devices,
being the equipment on which the Volpara Products operate. If
significant reforms subsequently are made to the healthcare system in
the US, or in other jurisdictions, those reforms could adversely affect
VHT’s financial condition and operating results. Further, if governments
listen to various advocacy groups and sceptics opposed to the use of
breast screening and mammograms and decide to restrict or cease
funding breast screening altogether, this could have a material adverse
impact on VHT’s financial performance.
Section 5
VHT may not
be able to pass
the regulatory
hurdles and gain
the necessary
approvals and
clearances to
use its products
in certain
jurisdictions
As VHT seeks to diversify its product range and develop new products,
VHT cannot guarantee that it will receive all necessary regulatory
approvals, nor can VHT accurately predict the product approval
timelines or other requirements that may be imposed by regulars (e.g.
clinical trials or other requirements proving effectiveness of its new
products).
Section 5
QUESTION
ANSWER
LOCATION
Other key risks
The above risks are a summary of some of the key risks but they are not
an exhaustive list of all of the key risks that may affect VHT’s business
or that may be associated with an investment in the Shares. Full details
of the above risks, together with a number of other key risks, are
included in Section 5, and investors are recommended to review all of
those key risks carefully before making an investment decision.
Section 5
1.7 Overview of the Offer
QUESTION
ANSWER
LOCATION
What is the Offer?
The Offer is 20 million Shares at A$0.50 per Share to raise A$10
million before Offer costs.
Section 7
Where will the
Shares be listed?
Within seven days of the Prospectus Date, VHT will make an
application to ASX for admission to the Official List and Official
Quotation of the Shares under ASX code “VHT”.
Section 7
What will
the market
capitalisation of the
Company be upon
Listing?
The market capitalisation of VHT on listing will depend on the price at
which the Shares trade, which cannot be predicted. At the Offer Price,
VHT’s market capitalisation will be A$61 million.
Key Offer
Details
How will the
proceeds of the
Offer be used?
The proceeds of NZ$10.8 million from the Offer will be used to:
Section 4
• meet the costs of the Offer ($1.2 million);
• fund expansion of sales and marketing infrastructure and
activities ($3.5 million);
• develop and roll out VolparaEnterprise and Cloud-based
offerings ($2 million);
• fast-track product and services innovation ($1 million); and
• provide working capital and administration costs ($3.1 million).
Is the Offer
underwritten?
The Offer is fully underwritten by the Lead Manager.
Sections
7 & 10
What are the
tax implications
of investing in
Shares?
The tax consequences of any investment in the Shares will depend
upon an investor’s particular circumstances. An overview of Australia
and New Zealand tax considerations is set out in Sections 10.13 and
10.14, however applicants should obtain their own tax advice prior to
deciding whether to invest.
Section 10
How can I apply?
Shares under the Offer will only be available under the Institutional
Offer and the Broker Firm Offer. Broker Firm Applicants may apply
for Shares by completing a valid Application Form attached to or
accompanying this Prospectus and lodging it with the Broker who
invited them to participate in the Offer.
Section 7
When will I receive
confirmation that
my application has
been successful?
Initial holding statements are expected to be dispatched by standard
post on or around 21 April 2016.
Section 7
17
1
INVESTMENT OVERVIEW
QUESTION
ANSWER
LOCATION
What is the
minimum
Application size
under the Offer?
The minimum Application under the Broker Firm Offer is A$2,000
(equivalent to 4,000 Shares) and in multiples of A$500 (1,000 Shares)
thereafter. There is no maximum value of Shares that may be applied
for under the Broker Firm Offer. However, the Company and the Lead
Manager reserve the right to aggregate any Applications which they
believe may be multiple Applications from the same person or reject or
scale back any Applications in the Broker Firm Offer. The Company and
the Lead Manager may determine a person to be eligible to participate
in the Broker Firm Offer, and may amend or waive the Broker Firm Offer
Application procedures or requirements, in its discretion in compliance
with applicable laws.
Section 7
Where can I get
more information
about this
Prospectus or the
Offer?
Please call the VHT Offer Information Line on 1300 737 760 (toll free
within Australia) or +61 9290 9600 (outside Australia) from 8.30 am until
5.30 pm (Sydney time), Monday to Friday.
If you are unclear in relation to any matter or are uncertain as to whether
VHT is a suitable investment for you, you should seek professional
guidance from your stockbroker, solicitor, accountant, financial adviser
or other professional adviser before deciding whether to invest.
1.8 Significant interests of key people and related party transactions
18
QUESTION
ANSWER
LOCATION
Will any Shares
be subject to
restrictions on
disposal following
Completion?
A total of 97.5 million Shares amounting to 80% of the post-Offer
Shares on issue will be held in escrow, of which 52 million Shares
held by Directors and management will be escrowed for 24 months
and the balance for up to 12 months.
Section 7
What significant
benefits and
interests are
payable to Directors
and other persons
connected with
VHT or the Offer
and what significant
interests do they
hold?
The only benefits accruing or payable to the Directors will be directors’
fees payable in the normal course of business, details of which are
set out, along with the Directors’ interests in Shares and options, in
Section 6.
Section 6
Will any related
party have a
significant interest
in the Company or
the Offer?
Each of Roger Allen (Chairman), Ralph Highnam (CEO) and Sir
John Michael Brady (Non-Executive Director) and their respective
controlled entities will be substantial Shareholders with in excess of
5% of the issued capital of the Company after the Offer.
The fees and interests of other persons connected with the Offer are
also set out in Section 6.
Details of the VHT shareholding structure, including substantial
Shareholders, after the Offer are set out in Section 7.
Sections
6&7
2
M A RK E T OVERVIE W
A ND OPP ORTUNITIE S
19
2
MARKET OVERVIEW AND OPPORTUNITIES
2.1 Breast cancer—a major global issue
Breast cancer is a major global health issue affecting millions of women and their communities. Worldwide 1.7
million new cases were diagnosed in 2012, with 521,900 of these resulting in death, including 2,795 women in
Australia and 617 women in New Zealand.
In the developed world (specifically, the US, Australia, Canada, New Zealand and most of Europe), it was
estimated in 1981 that around 1 in 14 women would develop breast cancer during their lifetime. That number is
now 1 in 8. In the developing world, breast cancer was virtually unknown approximately 20 to 30 years ago, but
the rising rate, particularly in Asia, is thought to be due to the adoption of more Western lifestyles and diets and
greater exposure to toxins.
Of all cancers, breast cancer causes the third-highest economic loss globally, at US$88 billion per year. This
figure represents the economic value of the years lost due to disability and premature death. According to the
World Health Organization’s International Agency for Cancer Research, the “global battle against cancer” will
be won only with a commitment to early detection, screening and prevention measures, especially in developing
countries.1 The expanding global scale of breast cancer underpins the need for widespread adoption of
technologies that can effectively carry out such a commitment. With its scientifically validated technology, VHT
is heavily involved in the fight to reduce the mortality and costs of breast cancer.
2.2 The breast, breast density and the risk of developing breast cancer
A woman’s breasts are comprised of many different kinds of tissue but for most purposes can be considered to
be made up of three types of tissue:
• fatty tissue, which stores energy;
• fibrous tissue, which provides support; and
• glandular tissue, which enables the production of milk.
The non-fatty tissues—glandular and fibrous—are known collectively as “dense” tissue. In young women, the
proportion of the breast tissue that is dense is typically very high. As the woman ages the amount of dense tissue
decreases and converts to fat. This process is believed to accelerate in the first few years of the menopause.
In mammograms—pictures of the breast taken using x-rays—dense tissue appears whiter than fatty tissue.
These images show how one woman’s breasts change over time as she goes from the age of 48 to 52 to 55.
As this woman is
aging from 48 to 52 to
55, her mammograms
are getting darker,
indicating that the
glandular tissue is
slowly turning to fat.
Breast cancers develop overwhelmingly in glandular tissue (which is why breast cancer is very rare in men). In
consequence, the volume of glandular tissue in the breast is of fundamental interest to clinicians. Indeed, it has
been conclusively shown that an elevated level of glandular tissue represents a significant risk of a woman’s
chance of developing breast cancer. 2 3 Since it is intrinsically hard to distinguish between fibrous and glandular
tissues in terms of x-ray attenuation (roughly: absorption), radiologists generally group fibrous and glandular
tissues and refer to them using the term “breast density”.
1 Stewart BW, Wild CP, editors (2014). World Cancer Report 2014. Lyon, France: International Agency for Research on Cancer.
2 Boyd et. al. Mammographic Density and the Risk and Detection of Breast Cancer. N Engl J Med; 2007(356)227–36.
3 McCormack and dos Santos Silva. Breast Density and Parenchymal Patterns of Markers of Breast Cancer Risk: A Metaanalysis. Cancer Epidemiol Biomarkers Prev; 2006(15)1159–1169.
20
Breast density is the ratio of the volume of fibrous and glandular tissues to the overall breast volume:
• High breast density means there is a greater volume of fibroglandular breast tissue compared to fat.
• Low breast density means there is a greater volume of fat compared to fibroglandular breast tissue.
All women have varying volumes of fatty and fibroglandular breast tissues in their breasts, and these change
how the mammogram looks from woman to woman. These are some example mammograms:
On the left is a very
fatty breast, and on
the right a very dense
breast. Typically, in
the developed world
most women fall in the
middle with 10% at
either extreme.
Today, breast density assessment is predominately performed subjectively, by eye, following the set of standards
established by the American College of Radiology. The Breast Imaging-Reporting and Data System (BI-RADS)
breast density categories outline four graduated levels of breast density, as shown in the following table:
BI-RADS 5TH EDITION BREAST COMPOSITION CATEGORIES
a
The breasts are almost entirely fatty
b
There are scattered areas of fibroglandular density
c
The breasts are heterogeneously dense, which may obscure detection of small masses
d
The breasts are extremely dense, which lowers the sensitivity of mammography
Unfortunately, despite its importance, many studies have shown a considerable variation in assessment of
density category by experts. A typical figure is that two experts will disagree on density category 35% of the
time. Women whose breasts fall in to the “a” or “b” category are said to have “fatty breasts,” and those in “c” or
“d” are said to have “dense breasts.”
According to the American Cancer Society, “women with dense breast tissue are at moderate risk for breast
cancer.” See the table below for the American Cancer Society’s rating of known risk factors.
(Source: American Cancer Society, Breast Cancer Facts & Figures 2013 –2014.)
Factors that increase
the relative risk for
breast cancer in
women.
RELATIVE RISK
FACTOR
• Age (65+ vs. <65 years, although risk increases across all ages until age 80)
• Biopsy-confirmed atypical hyperplasia
• Certain inherited genetic mutations for breast cancer (BRCA1 and BRCA2)
>4.0 times
• Lobular carcinoma in situ
• Mammographically dense breasts
• Personal history of early onset (<40 years) breast cancer
• Two or more first-degree relatives with breast cancer diagnosed at an early age
• Personal history of breast cancer (40+ years)
2.1–4.0 times
• High endogenous estrogen or testosterone levels (postmenopausal)
• High-dose radiation to chest
• One first-degree relative with breast cancer
VHT’s flagship product, VolparaDensity, produces objective, automated density measurements from all the most
common x-ray vendors.
21
2
2.3 Reducing deaths: early detection via “one size fits all” screening
Today, breast cancer screening is based almost entirely on mammograms, and this has been shown to enable
the detection of cancers as small as 1mm. Mammography is the only screening technique proven to reduce
mortality. The International Agency for Research on Cancer recently found that women aged 50 to 69 who
regularly receive mammography screening reduce their risk of dying from breast cancer by 40%, compared with
women who are not screened.
VHT estimates that, globally, 75 million women are screened annually for breast cancer with mammography, with
nearly 40 million of those being in the US. This global number is growing rapidly due to the increased incidence of
breast cancer across Asia, Africa and South America, as well as among the aging populations in the West. As the
incidence of breast cancer is expected to double by 2030, it is reasonable to assume the number of mammograms
will rise similarly.
As a measure of the rapid growth of the market, in 1997 there were 14 million women screened annually in the
US, compared to 39 million women in 2016.
Screening protocols, ages, intervals and imaging modalities vary country by country, but within each country are
generally one size fits all, though some countries are now trying to identify high-risk women for screening using
breast MRI.
Mammographic screening does detect cancer and helps save lives, but it does so at a high cost—an estimated
$7.8 billion in the US alone—and with considerable risks involved. VHT’s automated breast density assessment
tools address these costs and risks by optimising mammography’s ability to detect breast cancer early.
2.4 Women are driving change: personalised breast cancer screening
Since breast screening programs are based on x-rays, there is an inevitable risk of radiation-induced cancer,
though fortunately this has been shown to be relatively small. More importantly, there are the possibilities of
false alarms and of missing cancers. As noted above, the second of these is vastly more likely to occur in women
with dense breasts. In the US, breast screening is the second-leading cause of medical malpractice claims; not
least where a woman sues the imaging centre for missing her cancer at mammography screening. It is estimated
that 20–30% of cancers are missed in mammographic screening, with most of these due to high breast density.
On a mammogram, fatty tissue in the breast looks dark and the denser fibroglandular breast tissue looks
light grey or white. Significantly, cancer can also appear white on a mammogram, which makes interpreting
mammograms more difficult in women with dense breasts, as shown in the following figure where the same
“cancer,” in this case a white star, is present:
A comparison of the
relative ease of seeing
a cancer in a fatty
breast (left) and a
dense breast (right).
Can you see the white
star?
A recent study showed that 85% of cancers in fatty breasts were detected using mammography, while only 59%
of cancers in dense breasts were detected.
Awareness of the importance of breast density is growing among women. In the US, breast density awareness
groups have been formed by women whose cancers were missed during screenings due to dense tissue.
Recognition of the risks of high breast density outlined above has driven women in the US to demand to know
their breast density and be informed of their options if their breast density is high. Are You Dense?, a patient
advocacy group led by breast cancer survivor Nancy Cappello, successfully lobbied for state law changes
requiring that women be informed of their breast density at the time of their screening. As of January 2016,
women in 24 states, covering more than 65% of the screening population in the US, must now be informed of
their breast density. Two more states suggest notification, another nine have legislation underway and a federal
law is under consideration.
22
Are You Dense?,
a leading US patient
advocacy group that
successfully lobbied
for the first state
law (in Connecticut)
requiring that women
be notified of their
breast density at
the time of their
mammographic
screening.
Legislation activity
for notification of
breast density in
the US. (Source:
DenseBreast-info, Inc.
2015 –2016.)
Breast density is not a problem confined to a small subset of women: in North America some 40–50% of women
will have dense breasts at screening age; in Korea, for example, the figure is nearer to 70–80%. As awareness
of the implications of breast density among women and legislators continues to grow, both in the US and
globally, so will the need for personalised healthcare.
VHT views the density laws as indicative of women wanting to take control of their breast health, and is
committed to bringing women this important information about their breast tissue and helping them track and
monitor changes over time.
2.5 “Big iron” industry’s response to breast density
“Big iron,” the major manufacturers of digital imaging hardware, are responding to the demands of the market by
building devices designed to better detect breast cancers, especially in dense breasts. In particular:
• Digital breast tomosynthesis, a 3D form of mammography, has been on the market for a number of years.
Early results are promising, especially in reducing the recall rate from screening to a work-up clinic, but
there are concerns about radiation dose and ability to image extremely dense breasts. Some sites only
perform tomosynthesis on denser breasts.
• Whole breast ultrasound is being developed to act as a screening system. Ultrasound is not so affected
by breast density and carries no ionizing radiation, but, though the cancer detection rates look promising,
there are market concerns about the potential for false positives. The manufacturers are pushing
ultrasound for all women with dense breasts.
• Breast MRI is an imaging modality already used for imaging very high-risk women, but as a broader
screening modality suffers from use of a contrast agent, cost and availability. VHT is involved in a trial in
the Netherlands looking at the cost-effectiveness of breast MRI for women with extremely dense breasts.
2.6 Industry challenges are VHT opportunities
Despite the hardware advances, and women pushing for better screening, significant challenges for the industry
remain. These challenges are driven by payers demanding improved health outcomes at lower cost, payers
being wary of self-referrals at breast centres and the fact that not identifying breast cancer remains the secondbiggest cause of medical malpractice in the US.
23
2
DENSE BREAST WORKFLOW
VHT PRODUCT
How to assess density consistently?
VolparaDensity, automated density.
How to assess density in a timely
manner?
VolparaDensity, returns a result within two minutes of the last
x-ray.
How to justify to payers and others that
imaging is necessary?
VolparaDensity, objective, CE marked, and FDA and TGA
cleared.
COST-EFFECTIVENESS,
SAFETY AND QUALITY
VHT PRODUCT
How to cost-effectively monitor patientspecific radiation dose?
VolparaDoseRT displays the dose on the patient scorecard for
quick visual check by the technologist and radiologist.
How to cost-effectively monitor breast
compression?
VolparaDoseRT displays a unique measure of breast
compression onto the patient scorecard for quick visual check by
the technologist and radiologist.
How to improve productivity of machines
and operators?
VolparaAnalytics presents survey information over entire sites to
allow cross-comparison and in-depth analysis.
How to improve performance of
machines and operators?
VolparaAnalytics presents survey information over entire sites to
allow cross-comparison and in-depth analysis.
In short, the Volpara Products are capable of providing the critical objectivity and monitoring to support
personalised, high-quality breast cancer screening.
24
3
THE COMPA NY A ND IT S
PRODUC TS A ND SERVICE S
25
3
THE COMPANY AND ITS PRODUCTS AND SERVICES
3.1 Company history and overview
Professor Sir John Michael Brady, veteran entrepreneur and computer vision expert, moved from the
Massachusetts Institute of Technology (MIT) to the University of Oxford in 1986 to build a robotics laboratory.
In 1989, following the death of his mother-in-law from breast cancer, Professor Brady decided to transition his
energy from robotics to medical imaging. One of Professor Brady’s first medical imaging PhD students was
Dr Ralph Highnam. Together they laid out the basis for the quantification of breast composition automatically
from breast x-rays—film mammograms—in Dr Highnam’s 1992 PhD thesis. At that time, the concept of
quantification, while appreciated, was far beyond what the breast screening market could use clinically, and the
ideas proved to be extremely difficult to implement robustly. However, as mammography turned digital in the
early 2000s, implementation became both easier and more necessary. Both Professor Brady and Dr Highnam
and, separately, their friends and fellow scientists Professor Nico Karssemeijer at the University of Nijmegen
and Professor Martin Yaffe at the University of Toronto, began to make progress in the field and attract clinical
interest. In 2009, Brady, Highnam, Karssemeijer and Yaffe met at a major medical imaging trade show in
Chicago to initiate a collaboration that would prove to have far-reaching consequences. They realised that by
pooling their collective talents they could generate and file new intellectual property and implement robustly the
ideas originally formulated in 1992: quantification of breast composition via volumetric parameters (“Volpara”).
Noting their clinical collaborators’ growing interest in the quantitative measures of the breast they were
generating, and with the key enabler of digital technology, the founders felt the market was now ready for such a
quantitative analysis of breast images.
Each of the founders has extensive commercial experience: Professor Brady has started numerous companies
in the robotics, medical imaging and Internet spaces; Professor Brady and Dr Highnam commercialised
University of Oxford technology related to body imaging in 1999–2003, with Dr Highnam the CEO of Mirada
Solutions from start-up until its purchase by CTI Molecular Imaging Inc.; Professor Karssemeijer was heavily
involved in R2 Technology, which pioneered computer-aided detection in mammograms and was eventually
purchased by Hologic, and has subsequently started several other companies; Professor Yaffe has been a longterm collaborator with the industry, particularly with GE Healthcare.
Following the sale of Mirada Solutions, Dr Highnam moved to Wellington, New Zealand. Today, Wellington
continues to be VHT’s headquarters, where Dr Highnam, the Company’s CEO, leads global operations with a
local staff of 23 full-time equivalents and another 8 full-time equivalents in the US, UK and Asia. Dr Highnam
may under certain circumstances be assisted by a highly experienced global management team.
VHT has been customer focused from the start, offering both clinical benefits to patients and financial benefits
to the breast centre. To ensure the customer’s voice is heard, the Company has a Medical Advisory Board that
provides key, confidential advice around products but also likely financial benefits to clinics. VHT also has a
much larger range of researchers globally with whom to collaborate in generating research and seeking product
direction. Profiles of the VHT Medical Advisory Board can be found in Section 6.4.
26
3.2 Core technology
The core technology underlying all of the Volpara Products is the ability to transform a digital mammogram, from
any of the supported x-ray vendors, into quantitative, standardised information about the breast, completely
removing all information about the imaging process itself. By analogy, consider a room with a wooden chair in it:
the chair is made of wood no matter if the light in the room is turned on or off.
Once the digital mammogram is in this standardised form, quantifying the respective volumes of tissues in the
breast is straightforward. These quantitative, standardised images, however, will also provide the ideal input in
the future to computer systems that seek to learn the earliest signs of breast cancer.
3.3 Volpara Products Overview
Breast density change
over time. The top row
shows mammograms
of the same breast over
seven years, one year
apart, from different
x-ray machines. The
bottom row displays the
standardised versions
of the same breasts
using the Volpara
Products, showing over
time how the dense
breast tissue is turning
to fat. In other words,
the image is becoming
less white (less
“dense”) over time.
1.VolparaDensity
VolparaDensity automatically, objectively assesses breast density, producing a patient scorecard that is
presented to the radiologist. The scorecard shows the patient’s name and ID, as well as the study date (top left).
The VolparaDensity
scorecard shows the
patient’s Volpara
Density Grade
(VDG) breast density
category (a, b, c or d),
the VDG thresholds
(where the patient
falls within the
specified category)
and the maximum
volumetric density of
both breasts.
At the bottom, information is summarised about the volumetric assessment for the right and left breast. The top
right gives the VDG, which the FDA has cleared as equivalent to the BI-RADS breast density category. A key
priority with this software is to get a score back to the patient within two minutes of the last x-ray so that density
can be discussed with her while she is still at the clinic. Case studies have shown that if the density discussion
takes place on site, many more women will opt for potentially lifesaving ultrasound.
27
3
Customers are buying VolparaDensity in order to provide consistency in density scores to their patients, achieve
improved workflow and throughput to additional screening, reduce legal liability due to the various laws, save
precious decision-making time for radiologists and have objective evidence to show insurers to justify why they
did certain imaging.
VHT’s intention from the start has been to work closely with the clinical community to obtain clinical validation
across a range of clinical uses. VolparaDensity is the subject of 142 publications, including 33 peer-reviewed
studies, many of which are independent (a full list is available from www.volparasolutions.com). Among many
other things, researchers have shown that VolparaDensity:
• correlates well to breast MRI, the established gold standard of breast density assessment;
• is related to risk of developing breast cancer;
• is related to risk of missing cancer in a mammogram; and
• improves consistency of independent readers within a group.
2.VolparaDoseRT
Currently, each x-ray machine vendor generates their own radiation dose score using different algorithms
and assumptions about breast density, but this makes it difficult to compare between vendors and impossible
to inform women of their specific dose. VolparaDensity generates a volumetric breast density score that
can be used to generate a patient-specific, standard radiation dose, VolparaDose. VolparaDoseRT includes
VolparaDose and VolparaPressure, a measure of breast compression that enables technologists to optimise
radiation dose and image quality without sacrificing patient comfort—all key factors in running a service in which
the customers (in this case women) can walk away with a more pleasant experience and a positive attitude to
returning next year. Together, these tools ensure that an individual woman has a better experience, receiving the
precise amount of pressure required to achieve a minimal radiation dose. The radiologist in turn has confidence
in providing a safer, more effective experience while also ensuring optimal image quality.
With VolparaDoseRT,
the VolparaDensity
scorecard shows the
amount of pressure
used to achieve a
minimal radiation
dose specific to the
patient.
3.VolparaAnalytics
VolparaAnalytics is a centralised dashboard that presents key metrics for population, productivity and quality
across an entire network of breast imaging systems to help improve clinical outcomes and increase profits.
VolparaAnalytics aggregates and processes population and digital mammography data output by mammography
units and the Volpara algorithm. It acts as a resource for greater quality assurance by providing breast centre
managers with an overview of the volumetric breast density characteristics of their population, as well as key
performance indicators relevant to the different mammography units and mammography operators (radiologic
technologists or radiographers) in that breast centre.
28
Customers are buying VolparaAnalytics to reduce costs associated with quality audits while improving their
business performance, both in terms of quantity and quality of throughput. For example, the imaging centre
manager can see how their machines and operators are performing and better understand their population: How
productive are my machines? Are my operators productive and giving appropriate doses? Case studies have
shown how powerful it is to have objective evidence on hand for discussions with physicists or operators.
During 2016, VHT will launch VolparaEnterprise, a Cloud-based, greatly expanded version of VolparaAnalytics
allowing cross-site comparisons and the collection of “big data” for the development of predictive healthcare tools.
Breast centres use
VolparaAnalytics to
gain an over view of
their population as
well as per formance
metrics per taining to
their staff.
4.VolparaServer – product platform based on international standards
Hospital networks and various imaging machines all operate under the Digital Imaging and Communications
in Medicine (DICOM) image format and communications standards. These standards make interoperability of
systems inside of hospitals straightforward. Today, VHT delivers its software in the form of a server that resides
within the hospital network and communicates with all the breast x-ray devices and imaging archiving systems.
The breast x-ray devices automatically send images for processing to VolparaServer, which then processes the
images for each woman and sends out results to the picture archiving and communication system (PACS) or
other workstations ready for the radiologist or other healthcare professional to review. Each VolparaServer can
handle up to 12 x-ray devices, and can send to multiple output devices.
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3
3.4 Intellectual property
Since 2009, VHT has built a portfolio of intellectual property rights which complements and facilitates the
Company’s business objectives. The portfolio now comprises three granted patents, seven patent applications
(proceeding in 40 countries), three trademarks registered in 38 countries, unregistered trademarks, copyright
works (including software, graphical and text) and trade secrets (which protect the key part of the code).
A “foundation” patent (PCT/GB2010/001472) describes VolparaDensity, and subsequent applications, which
relate to imaging systems and supplementary image properties, cite the foundation patent. Provisional patent
applications are filed regularly, reflecting VHT’s ongoing innovation, research and new product development. The
choice of territory reflects enforceability, commercial activity and statement of quality. Patents have thus been
pursued in China, the US and Europe, and copyright and trademarks provide protection in non-patent territories.
A full, independent report on the Company’s intellectual property portfolio can be found in Section 9.
3.5 Regulatory position
VolparaDensity is considered in most jurisdictions to be a medical “device” since it measures and estimates
specific information about a patient. Regulatory bodies in every market dictate that medical devices must be
manufactured to the highest standards and cleared before they can be marketed in that country. This presents
significant barriers to entry for new market entrants such as small research-led start-ups.
In the US, such a system is governed by the FDA under Title 21 of the Code of Federal Regulations, Part 820 –
Quality System Regulation. Hence in the US the Company says the Volpara Products conform to 21CFR-820 and
must seek regulatory clearance in the form of a 510(k) “substantially equivalent” letter from the FDA prior to marketing.
VHT has achieved three such FDA clearances so far:
K102556
Oct 2010
FDA 510(k) clearance for VolparaDensity, covering all digital mammography
vendors and BI-RADS 4th Edition density categories.
K152028
Oct 2015
FDA 510(k) clearance for VolparaDensity, covering all digital mammography
and tomosynthesis vendors, and BI-RADS 4th & 5th Edition density
categories.
K153427
Jan 2016
FDA 510(k) clearance for output of Volpara Density Map, a product not
yet formally launched commercially, but able to provide a standardised
mammogram to allow better judgement of change over time.
In the US, VolparaDoseRT and VolparaAnalytics are both covered as Class 1 quality control devices, which
requires that they are manufactured to FDA standards and registered.
In Europe, VHT has CE marking to sell all its products. VolparaDensity and VolparaDoseRT are both Class 1M
medical devices, while VolparaAnalytics is not considered a medical device and thus doesn’t require clearance.
VHT also has regulatory clearances to sell clinical systems into Australia, Canada, South Korea, Thailand and
New Zealand.
3.6 International recognition and endorsements
YEAR
AWARDS
2010
Focus on Health, Runner-up New Zealand Trade and Enterprise NZ Innovation Challenge
2013
Duncan Cotterill Innovative Hi-Tech Software Product, Finalist New Zealand Hi-Tech Awards
Discovering Gold, Finalist Wellington Gold Awards
2014
North American Frost & Sullivan Award for Technology Innovation Leadership in Breast
Imaging
Asia Pacific 2014 Winner—Ranked 54th, Deloitte Technology Fast 500
Rising Star, One to Watch—Wellington and Lower North Island, Deloitte 2014 Fast 50
Global Gold (exporters’ category) for business excellence, Winner Wellington Gold Awards
30
YEAR
AWARDS
2015
Cisco Hi-Tech Emerging Company of the Year, Winner New Zealand Hi-Tech Awards,
Asia Pacific 2015 Winner—Ranked 304th, Deloitte Technology Fast 500
2016
Frost & Sullivan Global Competitive Strategy, Innovation & Leadership Award for Breast
Density Assessment Solutions
3.7 Competitive landscape
The main women’s x-ray imaging companies are Hologic, GE Healthcare, and Siemens Medical Solutions USA,
Inc., and outside of the US, Philips Medical, Fuji Medical, IMS Giotto, Planmed and many other small players. For
the last few years, Hologic has dominated sales of breast x-ray imaging equipment mainly due to their first mover
advantage in digital breast tomosynthesis. Hologic is based in Bedford, near Boston, US and has revenues of over
US$2.7 billion.
1.VolparaDensity
VolparaDensity is a multi-vendor software solution to add on to almost all breast x-ray systems and generates
actual volumetric measurements of breast composition.
Of the commercial competitors to VolparaDensity in the US with FDA clearance:
• Hologic has a software add-on to their x-ray equipment, Quantra™, launched in 2008, that appears to be
compatible only with their x-ray detector, but it is unclear how clinically accepted Quantra™ is: 8 out of 10 of
VHT’s major customers are exclusively Hologic x-ray customers, but they have chosen VolparaDensity over
Quantra™.
• Philips has a “spectral” density solution requiring special hardware inside their x-ray systems. They have
low market share in the USA for their x-ray systems.
• iCAD’s software product, iReveal ®, appears to offer only a visual-like assessment of the breast image
compared to VolparaDensity’s. For example, VolparaDensity can report that a breast is 750cm3 in size,
while iReveal ® can only report that the breast covers 200cm2 of an image.
Both iReveal ® and Spectral Density have minimal publications to date, with VolparaDensity being by far the most
rigorously tested product on the market today, with 142 publications, including 33 peer-reviewed studies, many of
which are independent. By way of comparison, VHT’s nearest competitor has had approximately 25 publications.
Other companies are known to be developing automated breast density solutions, such as Densitas in Canada
(with CE marking and Canadian clearance), and there will likely be further entries as the market develops and
breast centre managers and other key individuals realise that visual assessment is not consistent enough, with a
35% disagreement rate between expert radiologists.
Despite the competition, VolparaDensity has been selected as the automated density tool for several major
international projects, including:
• DENSE (Dense tissue and Early breast Neoplasm ScrEening) trial, Netherlands, seeking to establish costeffectiveness of screening dense breast women with breast MRI. Finishes end 2017, involves 1,000,000
women a year being imaged on Hologic x-ray equipment.
• Norwegian Breast Cancer Screening Programme using Volpara to monitor breast density, dose and
compression to ensure safe and consistent mammographic imaging and patient experience. They have a
mix of x-ray vendors.
• KARMA (KARolinska MAmmography), Swedish project for risk prediction of breast cancer and for looking
at chemo-preventative drugs such as Tamoxifen.
• Athena Breast Health Network, California, US. The five University of California medical centres,
investigating creation of individual breast cancer risk assessment and personalised screening protocols. All
these sites have Hologic x-ray equipment.
2.VolparaDoseRT
To the best of VHT’s knowledge, as at the Prospectus Date, no other commercially available packages exist to
directly compete with VolparaDoseRT.
3.VolparaAnalytics
To the best of VHT’s knowledge, as at the Prospectus Date, no other commercially available packages exist to
directly compete with VolparaAnalytics.
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3
In the computed-tomography (CT) world, analytics systems to measure and monitor radiation doses have
become relatively commonplace, driven by laws in the US to minimise radiation dose. GE’s DoseWatch, Sectra’s
DoseTrack and Bayer’s Radimetrics appear to be the major dose tracking systems. As far as VHT can tell,
the companies behind these systems appear to intend to venture into the breast imaging space, but to date,
none have the capability of VolparaAnalytics for quantitative breast imaging. In fact, in 2014, Frost & Sullivan
awarded VHT the North American Frost & Sullivan Award for Technology Innovation Leadership in Breast
Imaging, declaring, “Frost & Sullivan lauds Volpara Solutions for what the breast imaging market has already
acknowledged: continuous leadership in technology innovation, thoughtfulness in identifying the unmet need
for dose tracking in breast imaging, and a clear vision for what analytics can achieve in the early detection and
treatment of breast cancer.”
3.8 Go-to-market
1.Initial focus on the US to drive incremental revenue
From the outset, VHT’s strategy has been to focus on what potential US customers would value. The country’s
large population, strong early adopter culture and strong patient advocacy groups promote a climate of innovation.
39 million women are screened in the US each year at around 8,700 breast centres, using approximately
15,000 x-ray machines and employing the skills of 2,000 breast specialist radiologists and some 20,000 general
radiologists. VHT has installations into over 103 clinical customers in the US, just over 1% of the market.
2.Global brand for global business
Breast cancer screening organisations globally meet regularly. VHT has set out to be seen as a global trusted
brand from the start, working with independent researchers in many countries and seeking clinical validation for
its technology.
In general, each country follows a similar journey, with researchers interested in VHT’s work doing the initial
research on “their” women using VolparaDensity, followed by clinical validation in bigger trials and then
movement and discussion about wide-scale adoption. Globally VHT has targeted the key opinion leaders and
researchers, based upon VHT’s knowledge from its wide and deep clinical and academic network, to carry out
the early trials, focusing especially on countries which are setting down clinical trials now. VHT has worked
within 34 countries so far:
Research and
customers
globally. VHT has
installations in 34
countries.
3.Balanced distribution
From the start, VHT’s strategy has been balanced distribution: seeking out high-quality local distributors around
the world but always retaining the ability to go direct to the customer. VHT has local distributors in a range of
countries, including the US, where Siemens Medical Solutions USA, Inc. acts as a distributor, as well as global
distributors including GE Healthcare.
Moving forward, VHT will continue to employ a balanced, hybrid model. VHT plans to rapidly expand its direct
sales model in the US as momentum continues to build, while maintaining a strong focus on distributors and
original equipment manufacturer (OEM) partners both in and outside the US.
Additionally, as VHT’s focus expands from breast density alone to a broader focus on leveraging big data and
personal health analytics to support the management of a woman’s breast health over time, VHT will expand
32
its go-to-market strategy to include a broader value proposition providing the breast centre managers and
radiologists with more tools and analytics than currently available at most centres today. This shift will mean that
VHT will need to appeal to a broader audience that includes mammography IT imaging managers and hospital
chief technology officers. Furthermore, as VHT’s product line broadens, the Company will focus on other
partners to include health IT and PACS companies.
3.9 VHT’s customers
Although VHT’s VolparaDensity and VolparaDoseRT end users are radiologists, and it is important to have their
support, VHT’s customer is, ultimately, the breast centre manager making budgetary decisions about workflow,
productivity, quality and safety, and more recent products such as VolparaAnalytics target them directly. In the
US, products sell where clinical benefit is matched with return on investment. VHT’s target customers to date
principally have been:
• large sites with multiple readers in states with breast density legislation that have concerns about
consistencies between readers in density scoring as well as the decision time taken up by density scoring;
• sites implementing ultrasound, or other density-driven additional screening technologies, that need the
workflow benefits of reporting density scores while the women are in the clinic; and
• sites buying new x-ray equipment that seek the latest new technology.
Given VHT’s balanced distribution model, there are three types of direct customer:
• breast centre managers, the sales team’s direct customers, though the chief radiologist has to be a
champion of the Volpara Products;
• distributors selling additional screening tools that want the workflow advantages that VolparaDensity offers
to drive patients to their products; and
• distributors selling x-ray equipment that need to offer a complete package of software tools and seek to
differentiate on dose and analytics.
3.10 Marketing and lead generation
VHT’s brand is being established and validated by its strong research and clinical focus, which includes key
research partners and other key opinion leaders around the world. VHT has leveraged these relationships to
seed the global market with the Company’s product and solutions offerings.
Overall, VHT employs a multi-layered approach to marketing that includes key opinion leader development,
direct and telesales, and partnerships with distributors and OEMs. These distribution methods alone drive many
new prospects to VHT. In addition, the Company participates in global trade shows and uses web, social media
and other Internet marketing strategies to draw interest to VHT. Finally, VHT works with many advocacy groups,
such as Are You Dense? and DenseBreast-info.org, which drive the marketing and branding strategy to spur
interest in the Company’s offerings.
The major trade shows which VHT regularly attends are the following, where VHT exhibits, meets with potential
business partners, arranges potential customer meetings and seeks to have posters and presentations:
• Radiological Society of North America (RSNA) scientific assembly and annual meeting in December each
year in Chicago, which draws over 50,000 people.
• European Congress of Radiology annual meeting in March each year in Vienna, which draws 20,000 people.
The VHT team
at the RSNA
conference,
December 2015
33
3
3.11 Current sales strategy
The current sales model is a sale of an upfront licence and then an optional annual service charge of 15% of the
price paid upfront to receive the latest updates and continued support. The pricing is per x-ray machine, so the
more machines a centre has, the higher the price paid. The value of the sale typically falls between US$30,000
and US$150,000 depending upon the numbers of x-ray machines and software modules, and whether the sale is
direct or through a distributor.
VHT’s product road map sees products and services being provided to imaging centres which will make
subscription-based pricing a more natural model to pursue.
3.12 Size of market
VHT estimates that there are 75 million women screened globally each year, at approximately 10,500 centres. Of
the 75 million, 39 million are in the US, where there are 8,700 centres with an average of 1.6 x-ray machines per
centre. Outside the US the centres tend to be much bigger.
Today, VHT sells an upfront licence, but is transitioning to pay for value. Taking an end-user price of near to
US$50,000 to cover the 1.6 x-ray machines per centre, and all of the Volpara Products, then the total available
market today is expected to be over A$1 billion, with the software maintenance component in addition each year
at 15% of the sales price.
The total available market will expand as VHT estimates the number of women to be screened each year is
expected to increased markedly over the next 10 years as Asia (in particular) starts to screen more women, and
as VHT introduces new products and services.
3.13 Reimbursement
To date, VHT has not directly pursued reimbursement for its products in the US for three main reasons:
1. uncertainties caused by the Affordable Care Act;
2. lack of consensus in medical circles about breast density; and
3. lack of available funds.
Furthermore, VHT believes that its value proposition, including cost savings and revenue earning potentials of its
Volpara Products, currently provides attractive financial incentive to buyers. Additionally, with 24 states in the US
having already adopted breast density legislation and another 8 to 10 considering legislation, VHT believes there
is already momentum and indirect pressure on insurers to consider reimbursement in the future. VHT intends to
use funds from the Offer to increase consultation with insurers in the US in regard to the Volpara Products being
used as pre-authorisation tools for additional imaging.
3.14 Growth strategy
There are four key elements to VHT’s growth strategy, as outlined below, each of which the funds from the Offer
will be used to advance.
1.Expand the US Sales and Marketing Team
The US remains the critical market for VHT. Revenues have been growing year on year for the last four years,
despite VHT being resource limited in the US. VHT intends to follow a more aggressive direct sales approach
and to build up sales infrastructure, particularly in the US, based initially on the existing Volpara Products.
2.Expand Marketing to Insurers and Women
Expand marketing to educate insurers about the Volpara Products and their benefits, particularly as a gateway
to additional imaging, and downwards to individual women through the increasing use of social media and
consumer education.
3.Move to a Subscription Model
To date, VHT’s flagship product has been VolparaDensity, which has been sold on an upfront licence plus
maintenance. Going forward, a Cloud version of VolparaAnalytics (to be called VolparaEnterprise) will increasingly
be the focus and will have VolparaDensity “inside”. This new marketing and delivery model will allow the easy
introduction of new features and a far closer partnership with the individual sites, meaning that a Cloud-based
subscription model will be the more natural choice.
4.Continue to Innovate and Lead
VHT is known for the cutting-edge science that underpins its products. VHT is committed to continuing to lead in
innovation, and to developing and releasing a stream of innovative products.
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4
FIN A NCIA L INFORM ATION
35
4
FINANCIAL INFORMATION
4.1 Overview
Volpara Health Technologies Limited (formerly Matakina
Technology Limited) is the parent entity of a broader
group (the Volpara Group) that also comprises:
• Volpara Solutions Limited (formerly Matakina
International Limited);
• Volpara Solutions Inc (formerly Matakina USA
Inc); and
• Matakina UK Limited (to be renamed Volpara
Solutions Europe Limited).
4.2 Basis of preparation and presentation of the
financial information
The financial information contained in this Section
includes information derived from the:
1.Audited consolidated statutory historical financial
information
1.audited consolidated statutory historical financial
information for the Volpara Group being the:
The audited historical financial information has been
extracted from the Volpara Group audited consolidated
financial statements for the year ended 31 March 2015.
• audited consolidated statutory historical income
statement for the year ended 31 March 2014 (as
restated); and
• audited consolidated statutory historical
income statement for the year 31 March 2015
(as restated) (the audited historical financial
information).
2.reviewed consolidated historical financial
information for the Volpara Group being the:
• reviewed consolidated historical income
statement for the nine months to 31 December
2015; and
• reviewed consolidated historical balance sheet
as at 31 December 2015 (the reviewed historical
financial information).
3.pro forma historical financial information for the
Volpara Group being the:
• pro forma historical balance sheet as at 31
December 2015 assuming underwritten proceeds
of $10.8 million (A$10 million) are raised from the
Offer and other pro forma adjustments (the pro
forma historical balance sheet).
The audited historical financial information, the reviewed
historical financial information and the pro forma
historical balance sheets together form the historical
financial information.
Also summarised in this Section are:
• the basis of preparation and presentation of the
financial information;
• details of share capital;
• details of share options on issue;
• sources and uses of funds raised under the
Offer;
• proposed dividend policy;
• commentary on capital expenditure;
• commentary on future acquisitions;
• commentary on debt; and
• commentary on working capital.
All amounts disclosed in the tables in this Section
are presented in New Zealand dollars and, unless
otherwise noted, are rounded to the nearest thousand.
The Directors expect growth of the business will
result from planned increased sales and marketing
activities, to be partly funded by the proceeds of the
Offer. However, the Directors have considered ASIC
36
Regulatory Guide 170 and, having regard to the
requirements of this Regulatory Guide and the current
status of the Company, note that any prospective
financial information would contain a broad range
of potential outcomes and possibilities such that
the Directors have concluded the Company cannot
include reliable prospective financial information in this
Prospectus.
The statutory historical income statements have
been audited by Deloitte (New Zealand) (Deloitte) in
accordance with “International Standards on Auditing
and International Standards on Auditing (New Zealand)”.
Deloitte issued an unqualified audit opinion in respect of
the consolidated financial statements for the year ended
31 March 2015 (as restated) on 19 February 2016, which
included restated comparative information in respect
of the year ended 31 March 2014. The audit report
included two emphasis of matter paragraphs, as follows:
“Emphasis of Matter – Going Concern
Without qualifying our (Deloitte’s) opinion, we draw
attention to the audited historical financial statements
which indicate that the Group incurred a net loss of
$3,022,000 for the year ended 31 March 2015 and, as
of that date, the Group’s total liabilities exceeded its
total assets by $10,130,000. These conditions, along
with other matters as set out in the audited historical
financial statements, indicate the existence of a material
uncertainty that may cast significant doubt about the
Group’s ability to continue as a going concern.”
If the Group was unable to continue as a going
concern, and pay debts as, and when, they become
due and payable, adjustments would have to be made
to reflect the situation that, in such circumstances,
assets may need to be realised, and liabilities
extinguished, other than in the normal course
of business and at amounts which could differ
significantly from the amounts at which they are
currently recorded in the Consolidated Statement of
Financial Position.
“Emphasis of Matter – Restatement
Without qualifying our (Deloitte’s) opinion, we also
draw attention to the significant accounting policies
which detailed that the Directors have, subsequent
to signing the consolidated financial statements for
the year ended 31 March 2015 on 26 August 2015,
become aware that the Company’s convertible
preference shares (CPS) had been incorrectly
classified as equity instruments and have restated
these financial statements and 31 March 2014
comparatives to reflect that, prior to conversion, due to
certain features of the convertible preference Shares it
has been determined they should be classified as debt
instruments and, therefore, a liability in the Statement
of Financial Position.”
The statement of significant accounting policies is
set out in Section 4.5. The consolidated financial
statements for the years ended 31 March 2014 and
31 March 2015 (as restated) have been prepared
in accordance with Generally Accepted Accounting
Practice in New Zealand (NZ GAAP). They comply
with the New Zealand equivalents to International
Financial Reporting Standards (NZ IFRS) and
other applicable Financial Reporting Standards as
appropriate for profit-oriented entities that qualify for
and apply differential reporting concessions.
2.Preparation of the Volpara Group reviewed
historical financial information
The reviewed historical financial information has
been extracted from the Volpara Group reviewed financial
statements for the nine months ended 31 December 2015.
The Volpara Group historical financial information has
been reviewed by Deloitte in accordance with NZ SRE
2410 Review of Financial Statements Performed by
the Independent Auditor of the Entity. A review of the
condensed consolidated interim financial statements in
accordance with NZ SRE 2410 is a limited assurance
engagement. The auditor performs procedures, primarily
consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and
applying analytical and other review procedures.
The procedures performed in a review are
substantially less than those performed in an audit
conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly, the auditor
does not express an audit opinion on those financial
statements. Deloitte issued an unqualified review
opinion in respect of the Volpara Group financial
statements for the nine months ended 31 December
2015. The review report included two emphasis of
matter paragraphs, as follows:
“Emphasis of Matter – Going Concern
Without qualifying our (Deloitte’s) opinion, we draw
attention to the reviewed historical financial statements
which indicate that the Group incurred a net loss
of $3,693,000 during the nine months ended 31
December 2015 and, as of that date, the Group’s total
liabilities exceeded its total assets by $13,737,000.
These conditions, along with other matters as set out
in the reviewed historical financial statements, indicate
the existence of a material uncertainty that may cast
significant doubt about the Group’s ability to continue
as a going concern.”
If the Group was unable to continue as a going
concern, and pay debts as, and when, they become
due and payable, adjustments would have to be made
to reflect the situation that, in such circumstances,
assets may need to be realised, and liabilities
extinguished, other than in the normal course
of business and at amounts which could differ
significantly from the amounts at which they are
currently recorded in the Consolidated Statement of
Financial Position.
which detail that the Directors have, subsequent to
signing the consolidated financial statements for the
year ended 31 March 2015, become aware that the
Company’s CPS had been incorrectly classified as
equity instruments and have restated the 31 March
2014 and 31 March 2015 comparatives in these
condensed consolidated interim financial statements to
reflect that, prior to conversion, due to certain features
of the CPS it has been determined they should be
classified as debt instruments and, therefore, a liability
in the Statement of Financial Position. The 31 March
2015 financial statements have also been restated.”
The statement of significant accounting policies is
set out in Section 4.5. The condensed consolidated
interim financial statements have been prepared in
accordance with NZ GAAP as appropriate for interim
financial statements. They have been prepared using
accounting policies consistent with International
Financial Reporting Standards (IFRS), with NZ IFRS,
and in accordance with New Zealand Equivalent to
International Financial Reporting Standard 34 and
International Accounting Standard 34.
3.Preparation of pro forma historical financial
information
The pro forma historical financial information has
been prepared using the Volpara Group’s reviewed
historical balance sheet as at 31 December 2015 and
certain Directors’ pro forma adjustments in relation
to the proposed Offer (which is the subject of this
Prospectus) and certain related transactions as
described below. In particular, the Directors’ pro forma
adjustments are intended to reflect the impact of the
proposed Offer and related costs, the conversion of
the CPS to ordinary Shares, settlement of the quasi
dividend entitlement (QDE) and the issue of options
under the Employee Share Option Plan (ESOP) as
though they had occurred as at 31 December 2015.
The pro forma historical financial information is presented
in an abbreviated form insofar as it does not include all
of the presentation and disclosures required by NZ IFRS
or IFRS and other mandatory reporting requirements
applicable to general purpose financial reports prepared
in accordance with the Companies Act 1993.
The financial information presented in this Section
should be read in conjunction with the risk factors set
out in Section 5 and other information contained in
this Prospectus.
4.3 Volpara Group historical income statements
Table 1 (page 38) presents the audited Volpara Group
consolidated historical income statements for the
years ended 31 March 2014 (as restated) and 31
March 2015 (as restated) together with the reviewed
historical income statement for the nine months ended
31 December 2015.
“Emphasis of Matter – Restatement
Without qualifying our (Deloitte’s) opinion, we also
draw attention to the significant accounting policies
37
4
Table 1: Volpara Group historical financial performance
YEAR ENDED 31 MARCH
NZ$’000
Revenue
Cost of Sales
Gross Profit
Other income
Total income
2014
AUDITED
RESTATED
2015
AUDITED
RESTATED
NINE MONTHS TO 31 DECEMBER
2015 REVIEWED
1,487
2,409
1,772
(91)
(372)
(324)
1,396
2,037
1,448
17
79
63
1,413
2,116
1,511
(745)
(933)
(888)
Expenses
-Administration
-
Sales and marketing
(1,541)
(1,864)
(1,861)
-
Engineering and science
(1,092)
(1,234)
(1,137)
-
Quality
(123)
(127)
(98)
-
Legal / IP
(111)
(104)
(209)
-Regulatory
(17)
(80)
(46)
-Finance
(559)
(796)
(965)
Total expenses
(4,188)
(5,138)
(5,204)
Loss before tax
(2,775)
(3,022)
(3,693)
-
-
-
(2,775)
(3,022)
(3,693)
32
(71)
(104)
(2,743)
(3,093)
(3,797)
Income tax expense
Loss for the period
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translating
foreign operations
Total comprehensive loss for the period,
net of tax
Notes:
38
1.
The Volpara Group had one operating segment being involved in the provision of products and services in
the medical technology industry and a corporate centre supporting the business.
2.
The income statements for the years ended 31 March 2014 and 31 March 2015 have been restated to reflect
that, prior to conversion, due to certain features of the CPS it has been determined they should be classified
as debt instruments and, therefore, a liability in the Statement of Financial Position. In addition, a QDE of
$907,559 was recorded as a finance expense for the year ended 31 March 2015.
3.
There are no non-recurring items in the historical periods which require adjustment. In addition, no
adjustments have been made to the statutory historical income statement to illustrate the pro forma impact
of listed company costs or the cost of the issue of options under the ESOP post 31 December 2015.
4.
The Directors of the Volpara Group estimate listed company costs to be $650,000 per annum, which
includes ASX Listing fees, Directors’ fees, insurances, annual reporting and other compliance expenses.
4.4 Pro forma historical balance sheet
The pro forma historical balance sheet below reflects the underwritten Offer of $10.8 million (A$10 million) together
with other adjustments set out in the accompanying notes and illustrates the Directors’ pro forma adjustments made
to the Volpara Group reviewed historical balance sheet as at 31 December 2015.
The pro forma adjustments reflect the impact of the Offer (and associated transactions) and the capital structure
which will be in place following completion of the Offer as if it had occurred or was in place as at 31 December 2015.
Table 2: Volpara Group - pro forma historical balance sheet as at 31 December 2015
AS AT 31 DECEMBER 2015
NZ$’000
NOTES
REVIEWED
PRO FORMA
ADJUSTMENTS
PRO FORMA
2, 3
1,164
9,799
10,963
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepaid expenses
Total current assets
764
764
74
74
2,002
9,799
11,801
Non-current assets
Property, plant and equipment
43
43
Patents and trademarks
2
2
Total non-current assets
45
-
45
2,047
9,799
11,846
Total assets
Liabilities
Current liabilities
Trade and other payables
544
544
Employee benefits
132
132
Convertible preference shares
4
15,108
(15,108)
-
Total current liabilities
15,784
(15,108)
676
Total liabilities
15,784
(15,108)
676
(13,737)
24,907
11,170
4, 5
344
25,572
25,936
Share-based payments
6
1,631
20
1,651
Retained earnings
7
(15,617)
(705)
(16,322)
Net assets
Equity
Ordinary shares
Other
Total equity
(95)
(13,737)
(95)
24,907
11,170
39
4
Notes:
1. All inflows and outflows incurred in AUD have been converted to NZD assuming an exchange rate of 1 AUD
: 1.08 NZD.
The Directors’ pro forma adjustments made are:
2. Increase in pro forma cash from the Offer of $9.793 million through the issue of Shares to raise $10.8
million (A$10 million) less Offer transaction costs (estimated to be $1.007 million since 31 December 2015).
3. Increase in pro forma cash from the exercise of certain options in the three months to 31 March 2016. Pro
forma cash received was $0.006 million and the number of Shares issued was 766,703.
4. Conversion of the CPS: all outstanding CPS ($12.292 million) plus pro forma accrued quasi dividend to 31 March
2016 ($3.200 million) are pro forma assumed to convert to ordinary Shares in accordance with the terms of the
CPS Deed. The quasi dividend pro forma accrued from 31 December 2015 to 31 March 2016 is $0.384 million.
5. The pro forma balance sheet reflects, as a result of the underwritten Offer, an increase in contributed
equity (ordinary shares) of $10.093 million through the issue of Shares by the Company ($10.8 million less
Offer costs offset against contributed equity estimated to be $0.707 million).
6. Movements in the share option reserve reflect the pro forma impact of the issue of options under the ESOP
since 31 December 2015. The pro forma expense for the period to 31 March 2015 is $0.020 million.
7. Retained earnings is decreased due to the pro forma expensing of offer costs which are not set off against
issued capital ($0.300 million), the quasi dividend pro forma expense for the 3 months to 31 March 2016
($0.384 million) and the pro forma ESOP expense for the period of ($0.020 million).
The pro forma historical balance sheet is provided for illustrative purposes only and is not represented as being
indicative of the Volpara Group’s future financial position.
Further information on the sources and uses of funds of the Offer is contained later in this Section.
4.5 Statement of significant accounting policies
The principal accounting policies adopted in the
preparation of the financial statements for the nine
months ended 31 December 2015 are set out below.
Statement of compliance
Volpara Health Technologies Limited is a limited
company incorporated in New Zealand. Its principal
place of business is Level 12, 86 Victoria St,
Wellington 6011, New Zealand. Its registered office
is Miller Dean CA Limited, Level 5, 203–209 Willis
Street, Wellington 6142, New Zealand.
Volpara Health Technologies Limited (previously
Matakina Technology Limited) is a profit-oriented
company incorporated under the Companies Act 1993
and domiciled in New Zealand. Its principal sales and
services are in the medical device software industry.
The consolidated financial statements of the Volpara
Group for the period ended 31 December 2015 comprise
Volpara Health Technologies Limited and its subsidiaries.
The financial statements have been prepared in
accordance with NZ GAAP as appropriate for interim
financial statements. They have been prepared using
accounting policies consistent with IFRS, with NZ
IFRS, and in accordance with New Zealand Equivalent
to International Accounting Standard 34 and
International Accounting Standard 34.
The financial statements were authorised for issue by
the Directors on 19 February 2016.
Basis of preparation
Unless otherwise stated the measurement basis
adopted is that of historical cost.
The functional and presentation currency is New
Zealand Dollars (NZ$).
40
Accounting policies are selected and applied in a
manner which ensures that the resulting financial
information satisfies the concepts of relevance and
reliability, thereby ensuring that the substance of the
underlying transactions or other events is reported.
Significant accounting policies
The following significant accounting policies have
been adopted in the preparation and presentation of
the financial statements:
a.Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the Group, being Volpara
Health Technologies Limited and its subsidiaries
Volpara Solutions Limited, Volpara Solutions Inc. and
Matakina UK Limited. Subsidiaries are entities which
are controlled by the Company. Control is achieved
when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from
its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there
are changes to one or more of the three elements of
control listed above.
Consolidation of a subsidiary begins when the
Company obtains control over the subsidiary and
ceases when the Company loses control of the
subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the period
are included in the consolidated statement of other
comprehensive income from the date the Company
gains control until the date when the Company ceases
to control the subsidiary.
Profit or loss and each component of other
comprehensive income are attributed to the owners
of the Company. Total comprehensive income
of subsidiaries is attributed to the owners of the
Company. All intragroup assets and liabilities,
equity, income, expenses and cash flows relating to
transactions between members of the Volpara Group
are eliminated in full on consolidation.
Consistent accounting policies are employed in the
preparation and presentation of the Volpara Group
financial statements.
The 12-month balance date of the Volpara Group is
31 March.
b.Revenue recognition
Revenue from the sale of goods is recognised when
the goods are delivered and titles have passed, at
which time all the following conditions are satisfied:
• the Volpara Group has transferred to the buyer
the significant risks and rewards of ownership of
the goods;
• the Volpara Group retains neither continuing
managerial involvement to the degree usually
associated with ownership nor effective control
over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits
associated with the transaction will flow to the
Volpara Group; and
• the costs incurred or to be incurred in respect of
the transaction can be measured reliably.
Revenue from a contract to provide services is
recognised by reference to the stage of completion of
the contract, with unrecognised revenue recorded as a
liability in the balance sheet. The stage of completion
of the contract is determined as follows:
• installation fees are recognised by reference
to the stage of completion of the installation,
determined as the proportion of the total time
expected to install that has elapsed at the end of
the reporting period; and
• servicing and maintenance fees are recognised
by reference to the proportion of the contract that
has been completed within the respective period.
Dividend income from investments is recognised
when the Shareholder’s right to receive payment has
been established (provided that it is probable that the
economic benefits will flow to the Volpara Group and
the amount of income can be measured reliably).
Interest income from a financial asset is recognised
when it is probable that the economic benefits will flow
to the Volpara Group and the amount of income can be
measured reliably.
c.Foreign currencies
For the purpose of the consolidated financial
statements, the results and position of each group
entity are expressed in NZ$, which is the functional
currency of the Company and the presentation
currency for the consolidated financial statements.
For the purposes of presenting these consolidated
financial statements, the assets and liabilities of the
Volpara Group’s foreign operations are translated
into NZ$ using exchange rates prevailing at the end
of each reporting period. Income and expense items
are translated at the rates of exchange prevailing at
the dates of the transactions. Exchange differences
arising, if any, are recognised in other comprehensive
income and accumulated in equity.
All foreign currency transactions during the year are
brought to account using the exchange rate in effect at
the date of the transaction. Foreign currency monetary
items at reporting date are translated at the exchange
rate existing at reporting date. Non-monetary assets and
liabilities carried at fair values that are denominated in
foreign currencies are translated at the rates prevailing at
the date when the fair value was determined.
Exchange differences are recognised in profit or loss
in the period in which they arise.
d.Government grants
Government grants are not recognised until there is
reasonable assurance that the Volpara Group will
comply with the conditions attaching to them and that
the grants will be received.
Government grants that are receivable as
compensation for expenses or losses already incurred
are recognised in profit or loss in the period in which
it becomes reasonably certain that the Volpara Group
will comply with the conditions attaching to them and
that the grants will be received.
e.Employee benefits
Provision is made for benefits accruing to employees
in respect of wages and salaries, annual leave, long
service leave, and sick leave when it is probable that
settlement will be required and they are capable of
being measured reliably.
Provisions made in respect of employee benefits
expected to be settled within 12 months are measured
at their nominal values using the remuneration rate
expected to apply at the time of settlement.
f. Share-based payment arrangements
Equity-settled share-based payments to employees and
others providing similar services are measured at the
fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on
the Volpara Group’s estimate of equity instruments
that will eventually vest, with a corresponding
increase in equity. At the end of each reporting
period, the Volpara Group revises its estimate of
the number of equity instruments expected to vest.
The impact of the revision of the original estimates,
if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate,
with a corresponding adjustment to the equity-settled
employee benefits reserve.
41
4
g.Property, plant and equipment
Fixtures and equipment are stated at cost less
accumulated depreciation and accumulated
impairment losses.
Depreciation is recognised so as to write off the cost
or valuation of assets less their residual values over
their useful lives, using the straight-line method or
the diminishing value method. The estimated useful
lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the
effect of any changes in estimate accounted for on a
prospective basis.
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising
on the disposal or retirement of an item of property,
plant and equipment is determined as the difference
between the sales proceeds and the carrying amount
of the asset and is recognised in profit or loss.
h.Intangible assets
Trademarks are internally generated intangible assets.
Expenditure on research activities is recognised as an
expense in the period in which it is incurred.
An internally generated intangible asset arising from
development (or from the development phase of an
internal project) is recognised if, and only if, all of the
following have been demonstrated:
• the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
• the intention to complete the intangible asset and
use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable
future economic benefits;
• the availability of adequate technical, financial
and other resources to complete the development
and to use or sell the intangible asset; and
• the ability to measure reliably the expenditure
attributable to the intangible asset during its
development.
The amount initially recognised for internally
generated intangible assets is the sum of the
expenditure incurred from the date when the intangible
asset first meets the recognition criteria listed above.
Where no internally generated intangible asset can be
recognised, development expenditure is recognised in
profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally
generated intangible assets are reported at cost
less accumulated amortisation and accumulated
impairment losses.
An intangible asset is derecognised on disposal,
or when no future economic benefits are expected
from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the
42
carrying amount of the asset, are recognised in profit
or loss when the asset is derecognised.
i. Impairment of assets
At the end of each reporting period, the Volpara
Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is
any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable
amount of an individual asset, the Volpara Group
estimates the recoverable amount of the cashgenerating unit to which the asset belongs. When
a reasonable and consistent basis of allocation can
be identified, corporate assets are also allocated to
individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units
for which a reasonable and consistent allocation basis
can be identified.
Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash
generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or
cash generating unit) is reduced to its recoverable
amount and an impairment loss is recognised
immediately in profit or loss.
When an impairment loss subsequently reverses, the
carrying amount of the asset (or cash generating unit)
is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset (or cash generating unit) in
prior years and a reversal of an impairment loss is
recognised immediately in profit or loss.
j. Provisions
Provisions are recognised when the Volpara Group
has a present obligation (legal) as a result of a past
event, it is probable that the Volpara Group will
be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at the end of the reporting period,
taking into account the risks and uncertainties
surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present
value of those cash flows (when the effect of the time
value of money is material).
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is
virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
Provisions for warranty costs are recognised at the
date of sale of the relevant products, at the Directors’
best estimate of the expenditure required to settle the
Volpara Group’s obligation.
k.Financial assets
Investments are recognised and derecognised on trade
date where the purchase or sale of an investment is
under a contract whose terms require delivery of the
investment within the timeframe established by the
market concerned. Investments are initially measured
at fair value plus transaction costs, except for those
financial assets classified at fair value through profit or
loss which are initially measured at fair value.
Loans and receivables are measured at amortised cost
using the effective interest method less any impairment.
Financial assets, other than those at fair value through
profit or loss, are assessed for indicators of impairment
at each reporting date. Financial assets are impaired
where there is objective evidence that, as a result of one
or more events that occurred after the initial recognition
of the financial asset, the estimated future cash flows of
the investment have been impacted.
For financial assets carried at amortised cost, the
amount of the impairment is the difference between
the asset’s carrying amount and the present value
of the estimated future cash flows, discounted at the
original effective interest rate.
The carrying amount of the financial asset is reduced by
the impairment loss directly for all financial assets with
the exception of trade receivables where the carrying
amount is reduced through the use of an allowance
account. When a trade receivable is uncollectible, it is
written off against the allowance account.
A trade receivable is deemed to be uncollectible
upon notification of insolvency of the debtor or upon
receipt of similar evidence that the Volpara Group will
be unable to collect the trade receivable. Changes
in the carrying amount of the allowance account are
recognised in profit or loss.
If, in a subsequent period, the amount of the
impairment loss decreases and the decrease can
be related objectively to an event occurring after
the impairment loss was recognised, the previously
recognised impairment loss is reversed.
In respect of financial assets carried at amortised
cost, with the exception of trade receivables, the
impairment loss is reversed through profit or loss in
the statement of comprehensive income to the extent
that the carrying amount of the investment at the date
the impairment is reversed does not exceed what the
amortised cost would have been had the impairment
not been recognised. Subsequent recoveries of trade
receivables previously written off are credited against
the allowance account.
l. Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements.
Financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to
the issue of financial liabilities (other than financial
liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial
liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the issuance
of financial liabilities at fair value through profit or loss
are recognised immediately in profit or loss.
Trade payables and other accounts payable are
recognised when the Volpara Group becomes obliged
to make future payments resulting from the purchase
of goods and services.
m. Goods and Services Tax
All balances are presented net of Goods and Services
Tax (GST), except for receivables and payables which
are presented inclusive of GST.
n.Income tax
Income tax expense represents the sum of the tax
currently payable and deferred tax.
The tax currently payable is based on taxable profit
for the year. Taxable profit differs from “profit before
tax” as reported in the consolidated statement of
comprehensive income because of items of income or
expense that are taxable or deductible on other years
and items that are never taxable or deductible. The
Volpara Group’s current tax is calculated using tax
rates that have been enacted or substantively enacted
by the end of the reporting period.
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the consolidated financial statements and the
corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are generally
recognised for all taxable differences. Deferred tax
assets are generally recognised for all deductible
temporary differences to the extent that it is probable
that taxable profits will be available against which
those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are
not recognised if the temporary difference arises
from initial recognition of assets and liabilities in a
transaction that affects neither the taxable profit nor
the accounting profit.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax liabilities and assets are measured at
the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised,
based on tax rates (and tax laws) that have been
43
4
enacted or substantively enacted by the end of the
reporting period.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from
the manner in which the Volpara Group expects, at
the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Current and deferred taxes are recognised in profit
or loss, except when they relate to items that are
recognised in other comprehensive income or directly
in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income or
directly in equity respectively.
QDEs on CPS are considered to be non-deductible
expenses in respect of taxable profit and losses.
o.Convertible Preference Shares
The Volpara Group has classified the CPS as a current
liability due to the contractual arrangement with
convertible preference Shareholders.
Convertible Preference Shareholders are entitled to a
QDE calculated on the amount invested multiplied by
8% per annum (compounding monthly). If converted,
the QDE is settled through the issue of additional
ordinary shares. If redeemed, the QDE is paid in
cash based on the original amount invested plus 8%
per annum (compounding monthly). These amounts
have been accrued as a finance expense in the
Consolidated Statement of Comprehensive Income.
The CPS are convertible into ordinary shares at any
time at the option of the holder or automatically on the
occurrence of an Offer of Shares in the Company.
The CPS are also redeemable for cash if there is an
exit event (e.g. trade sale or a sale of 100% of the
Shares on issue) or at 6 years from the first issue of
the CPS (with the redemption at June 2016).
The CPS are not currently possible to value due to
variability in the range of estimates, therefore they are
carried at cost.
There are a total of 17,491,445 CPS on issue at 31
December 2015.
In addition, the CPS holders are entitled to the QDE
which has been calculated to 31 March 2016 and will
result in the equivalent of an additional 6,645,634
Shares being issued to CPS holders, as at that date.
All CPS and the QDE will convert to ordinary Shares
immediately prior to the quotation of the Shares in
the Company on the Australian Securities Exchange
(ASX).
p.Prior period adjustments
Subsequent to signing the consolidated financial
statements for the year ended 31 March 2015, the
Directors became aware that the Company’s CPS
had been incorrectly classified as equity instruments
in prior periods and had been included as part of the
Company’s share capital. Due to certain features of the
44
CPS it has been determined that, prior to conversion,
they should be classified as debt instruments and,
therefore, as a liability in the Statement of Financial
Position. The significant features of the CPS that result
in this classification are the ability of the holders to
redeem these shares for cash at cost plus 8% per year
after a period of 6 years from the date of first issue of
the CPS (with the earliest redemption date being June
2016); and an anti-dilution provision that protects the
holders from dilution resulting from later share issues at
a lower price than the holders originally paid. The terms
of the CPS therefore do not meet the “fixed number of
shares for a fixed amount of consideration” requirement
to be classified as equity as there is variability in the
number of ordinary shares that will be delivered on
conversion. The 31 March 2015 financial statements
have been restated.
q.Critical judgements in applying accounting policies
In regards to sales and service revenue recognition,
the Directors have considered the criteria for the
recognition of revenue from the sale of goods set out
in NZ IAS 18 and, in particular, whether the Volpara
Group had transferred to the buyer the significant risks
and rewards of ownership of the goods. In respect
of service and support agreements, the Directors
are satisfied that the significant risks and rewards of
ownership have been transferred and that recognition
of the revenue in the current year is appropriate.
In regards to valuing share options, these are priced
using a Black-Scholes pricing model. Where relevant,
the expected life used in the model has been adjusted
based on management’s best estimate for the effects
of non-transferability, exercise restrictions and
behavioural consideration. Expected volatility is based
on the historical share price volatility of NASDAQ listed companies in the biomedical field over the past
5 years.
r. Key sources of estimation uncertainty
There are currently no sources of estimation
uncertainty that have a significant risk of causing a
material adjustment to the carrying amounts of assets
and liabilities.
s.Standards not effective
The Volpara Group has not applied new and revised NZ
IFRSs (such as NZ IFRS 9 and 15) that have been issued
but are not effective and has not assessed their impact
as yet.
t. Transition to NZ IFRS 1
The Volpara Group has fully transitioned to NZ IFRS 1 as
at 31 December 2015. This transition has had no material
impact on the disclosures or on the amounts recognised
in the consolidated financial statements.
4.6 Share capital
Table 3, below sets out a reconciliation of share capital from 31 December 2015 to post Offer illustrating the
impact of the conversion of the CPS and the effect of the Offer.
Table 3: Share capital reconciliation
ISSUED CAPITAL
NOTES
Total share capital at 31 December 2015
Pro forma shares issued upon exercise of
options
1
Total share capital after exercise of options
NUMBER OF SHARES
NZ$’000 6
9,252,052
344
766,703
6
10,018,755
350
Pro forma shares issued upon conversion of
the CPS
2
17,491,445
12,292
Pro forma shares issued re quasi dividend to 31
March 2016
3
6,645,634
3,200
34,155,834
15,842
68,311,668
0
102,467,502
15,842
20,000,000
10,093
122,467,502
25,936
Total share capital after conversion of the CPS
Effect of 3:1 share split as at 31 March 2016
4
Total share capital on issue before the Offer
Shares to be issued under the Offer
5
Total share capital after the Offer
The above share capital reconciliation table is based on the following assumptions:
1. 766,703 ordinary shares were issued as a result of the exercise of certain options for which cash of $6,121
was received subsequent to 31 December 2015.
2. The CPS on issue are convertible into ordinary shares on a 1:1 basis immediately prior to the quotation of
the Shares in the Company on ASX.
3. Convertible Preference Shareholders are entitled to a QDE calculated on the amount invested, multiplied
by 8% per annum (compounding monthly), to be settled through the issue of additional ordinary shares,
which has been calculated as at, and will be satisfied on, 31 March 2016.
4. On 25 February 2016, the Directors resolved to reconstruct the capital of the Company by way of a 3:1
share split with the effect that all ordinary and CPS holders will hold 3 times the number of shares they held
previously as at that date. All Legacy Options on issue will be similarly adjusted in accordance with the
terms and conditions of the respective Option Deeds.
5. As the Offer is fully underwritten, the full number of 20 million Shares under the Offer to raise A$10 million
have been assumed as allotted.
6. Share capital in NZ$ is rounded to the nearest thousand.
45
4
4.7 Share-based remuneration
The Company has two employee and executive incentive plans in operation. The plans are both option plans.
There is a legacy employee share option plan (Legacy ESOP) and a new employee share option plan (New
ESOP).
The Legacy ESOP
The Volpara Group has operated an ownership-based compensation scheme for directors, executives and
senior employees of the Company and its subsidiaries since 2009. In accordance with the terms of the plan, as
approved by Shareholders at previous annual general meetings, directors, executives and senior employees
may be granted options to purchase ordinary shares at exercise prices ranging from $0.001 to $1.40 per ordinary
share. Each option converts into one ordinary share on exercise and the options will expire within 10 years of
their issue, or on termination of employment within the vesting period, whichever occurs first.
The Company has issued a total of 3,542,246 options under the Legacy ESOP. No further options will be issued
under the Legacy ESOP. Following the share split on 25 February 2016 the number of Legacy ESOP options on
issue is 10,626,738, with a commensurate adjustment to the exercise price as set out in the respective Option
Deeds.
Full details of the terms and conditions of the Legacy options re set out in section 10.5.
The New ESOP
The Company has issued a total of 5,325,000 options under the New ESOP, all with an exercise price of A$0.50,
being the Offer Price. Each option has certain vesting conditions and an expiry date of 7 years from issue. A
summary of the rights and liabilities attaching to the New ESOP options on issue is set out in section 10.5.
4.8 Obligations under operating leases
The Volpara Group has the following obligations remaining on a commercial property lease:
• The following 12 months: $88,415
• The subsequent 12 months: $66,312
The obligation consists of a property lease agreement for the office space at Level 12, 86 Victoria St., in
Wellington, New Zealand. The lease agreement is for a term of 3 years and 2 months starting from 1 August
2014 and the Volpara Group has a right to renewal once this term is complete. An expense of $68,729 was
recognised for this lease in the 9-month period ending 31 December 2015.
4.9 Dividends
VHT has not historically paid dividends and the Directors do not propose to declare a dividend with respect to
the financial year ended 31 March 2016.
4.10 Sources and use of proceeds of the Offer
In conjunction with the Offer, VHT will issue new equity of $10.8 million (A$10 million) under the underwritten offer.
Proceeds from the Offer will be used as set out in the following table.
Table 4: Sources and uses of proceeds of the capital raising
SOURCES OF FUNDS
46
NZ$’000
Cash proceeds received for new Shares issued
under the Offer
10,800
Total sources
10,800
USES OF FUNDS
NZ$’000
Payment of Offer expenses
1,160
Expansion of sales and marketing infrastructure
3,500
Development of VolparaEnterprise and Cloud
deployment
2,000
Product and services innovation
1,000
Working capital
3,140
Total uses
10,800
4.11 Capital expenditure
Included in the use of funds above, the Company expects to require capital expenditure in operating the
business and acquiring other operating assets, as the Directors consider appropriate. Such assets may include,
inter alia, technology, servers, development software tools and other capital items.
4.12 Acquisitions
The Company has no current intention to make any acquisitions but the directors intend to investigate strategic
acquisition opportunities from time to time. The Directors will consider each opportunity on a case-by-case basis to
evaluate the ability of the opportunity to enhance the business prospects of the Volpara Group.
4.13 Debt
The CPS are considered to be debt as at 31 December 2015, but will convert to equity immediately prior to
quotation of the Shares on the ASX so the Company will not have any debt at that time, other than trade and
other payables.
4.14 Working capital
The Company expects that it will have sufficient working capital at the conclusion of the Offer to meet its current
objectives.
47
5
48
RISK S
5
RISKS
5.1 Introduction
VHT is subject to various risk factors. Some of these are specific to VHT’s business activities. Others are of
a more general nature. Individually, or in combination, these risk factors may affect the future operating and
financial performance of VHT, its investment returns and the value of an investment in the Shares. Each of the
risks set out in this Section 5, if they eventuate, could have a material adverse impact on the Volpara Group’s
business, financial condition and results of operations.
Investors should be aware that this Section 5 does not purport to list every risk that may be associated with
an investment in the Shares or the digital health segment in which VHT operates now or in the future. The
occurrence or consequences of some of the risks described in this Section 5 are partially or completely outside
of the control of VHT, its Directors and its management team. This Section 5 should be read in conjunction
with other information disclosed in this Prospectus. There can be no guarantee that VHT will achieve its stated
objectives or that any forward-looking statements will be realised or otherwise eventuate.
The selection of risks has been based on the assessment of a combination of the probability of the risk
occurring, the ability to mitigate the risk and the impact of the risk if it did occur. That assessment is based
on the knowledge of the Directors at the Prospectus Date, but there is no guarantee or assurance that the
importance of different risks will not change or that other risks will not emerge.
Before applying for Shares, investors should satisfy themselves that they have a sufficient understanding of
these matters and should consider whether Shares are a suitable investment for them, having regard to their
own investment objectives, financial circumstances and taxation position. If investors are unclear in relation to
any of the risks outlined in this Section 5 or are uncertain as to whether VHT is a suitable investment for them,
they should seek professional guidance from their solicitor, stockbroker, accountant or other independent and
qualified professional adviser before deciding whether to invest.
5.2 Risks specific to an investment in VHT
The Shares to be issued under the Offer do not guarantee the payment of dividends, return of capital or any
increase in their market value. The list of risk factors below should be carefully considered, together with the
information contained elsewhere in this Prospectus, before deciding to apply for Shares.
TYPE OF RISK
DESCRIPTION OF RISK
The Company has a
limited operating history
and may face difficulties
encountered by
companies early in their
commercialisation
VHT was established in 2009 and has a limited operating history upon which
to evaluate its business and forecast future net sales and operating results. In
assessing VHT’s business prospects you should consider the various risks and
difficulties frequently encountered by companies early in their commercialisation
in competitive markets, particularly companies that develop and sell medical
technology. These risks include VHT’s ability to:
• implement and execute its business strategy;
• expand and improve the productivity of its sales force and marketing
programs;
• increase awareness of its brand and build loyalty among healthcare
professionals;
• manage expanding operations;
• respond effectively to competitive pressures and developments;
• deal with increasing and more complex regulatory oversight in global
jurisdictions; and
• successfully implement new features to its VolparaDensity product line and,
if required, obtain any amendments to regulatory approvals related to the
new features.
49
5
RISKS
TYPE OF RISK
DESCRIPTION OF RISK
VHT’s current business
model depends heavily
on the success of
VolparaDensity and
VHT’s ability to diversify
in the future
VolparaDensity has obtained the required regulatory approvals in the US, the
EU, Canada, Australia and NZ, where the product is already sold and generates
revenue. VHT expects to derive the majority of its revenue in the foreseeable
future from sales of its VolparaDensity breast imaging technology. VHT’s ability
to generate revenue will therefore largely depend on how effectively it can
market and distribute the VolparaDensity product range in the above markets
and after obtaining any necessary regulatory approvals in other jurisdictions.
If the Company is unable to achieve meaningful market penetration with its
VolparaDensity product range, its commercial strategy will be unachievable and
VHT will need to reconsider its business model.
VHT is transitioning from a classic medical device sales model to enterprise-wide
management solutions for healthcare professionals, for example through Cloudbased VolparaAnalytics, which are more naturally priced as a subscription service.
This switch from upfront to subscription pricing might be difficult and might impact
short-term revenues.
One of the reasons breast centres are buying VolparaDensity to use it as a gateway
to ultrasound for additional screening if the breast is dense. If ultrasound as a
screening modality fails to take off, and nothing else takes its place, then this
will impact on VHT’s growth plans in the density market and on VHT’s financial
performance.
VHT’s products are based around analysis of breast x-rays, which have been the
mainstay of breast cancer screening for 30 years at least. If a new imaging modality
comes out that significantly improves detection of cancer at a lower cost, then VHT
will need to diversify or adapt quickly. VHT is not currently aware of any new imaging
modality being available in the market.
Future profitability
uncertain
50
VHT is still in an early sales and commercialisation stage for the Volpara
Products. To date, it has funded its operations principally through issuing
securities and other domestic capital-raising activities. VHT is not yet profitable
and has incurred losses in each year since incorporation. VHT has achieved
early revenue principally in the US, however there is no guarantee that VHT will
be able to continue to grow in the US or in other key jurisdictions such as the EU.
VHT’s ability to operate profitably in the future will depend in part on whether it is
able to grow its own direct sales force and/or develop an international distribution
network on appropriate terms. If VHT fails to penetrate, or further penetrate,
the international markets for its products, VHT may never become profitable.
Other factors that will determine VHT’s profitability are its ability to manage its
costs, its ability to execute its development and growth strategies, economic
conditions in the markets in which it operates, competitive factors and regulatory
developments. Accordingly, the extent of future profits, if any, and the time
required to achieve a sustained profitability are uncertain. Moreover, the level of
any profitability cannot be predicted.
TYPE OF RISK
DESCRIPTION OF RISK
Business Associate
Agreements (BAA) and
dealing with protected
health information
VHT’s existing revenue stream is heavily dependent on a number of BAA with
hospitals and clinics in the US. In the US this is driven by the requirements of
HIPAA, which provides that healthcare providers in the US who deal with PHI,
being specific PHI that is governed by HIPAA and its associated regulations)
must enter into a BAA with any third parties who receive that PHI in the course of
performing services for, or on behalf of, that covered entity. Part of the purpose
of the BAA is to ensure that third-party service providers are subject to the
same obligations relating to the security of PHI as those that apply directly to
covered entities under HIPAA. Under the terms of a BAA it is customary for the
hospital or clinic to insist that VHT is liable for any unauthorised access to, or
use or disclosure of, PHI while it is under the control of VHT or its employees and
contractors. While VHT seeks to limit this liability to a monetary cap in negotiating
these contracts, it is not always possible for VHT to do so, and in some cases
VHT’s liability is not limited. Following recent changes to HIPAA regulations,
VHT can also be found to be directly liable to the US authorities for a breach of
obligations under the HIPAA regime.
While VHT seeks to mitigate the risk of an inadvertent disclosure of PHI or a
breach of privacy relating to PHI by its employees or contractors by putting
in place appropriate internal security measures and training, and taking out
insurance cover, if a breach were to arise and VHT is found to be liable and
subject to a payment of damages, this could have a material adverse effect on the
financial performance and reputation of VHT.
Further, as VHT moves progressively to a Cloud-based information storage
system, new risks for the storage of PHI and the maintenance of confidentiality of
PHI will arise. VHT will attempt to mitigate such cyber risks by ensuring that any
such Cloud-based system has HIPAA-compliant firewalls, but that in itself may
not be sufficient. Any Cloud-based system is subject to cyber-attacks or negligent
or malicious action by an employee or contractor, and any inadvertent disclosure
of PHI or breach of confidentiality of PHI while under the control of VHT or its
employees and contractors could lead to a damages claim and, if the Company
is found liable, could have a material adverse effect on VHT’s reputation and
financial performance.
Brand and reputation
risk
The reputation and brand of VHT and its products are important in attracting
hospitals, medical clinics, large companies and radiologists to use VHT’s
products. Any reputation damage or negative publicity around VHT or its products
could adversely impact on VHT’s business.
VHT is reliant on the
acceptance, promotion
and usage of its
products by healthcare
professionals
Regulatory approval and clearance of its products, including in Australia and the
US, will not guarantee market adoption of VHT’s products. In order to achieve
commercial success, VHT is reliant on the acceptance and promotion of its
products by healthcare professionals, including radiologists. Reasons that
healthcare professionals may be slow to adopt VHT’s products include (but are
not limited to):
• preference for the products of competitors due to familiarity with those
products or for various other reasons;
• limited return on investment data illustrating the cost benefits to healthcare
professionals of the use of VHT’s products; and
• concern over the potential liability risks involved in using a new product.
51
5
RISKS
TYPE OF RISK
DESCRIPTION OF RISK
Recruitment and
retention of key
personnel
As a relatively young and relatively closely held company, VHT relies heavily
on its existing key management personnel, who have intimate knowledge of
the business, its products and its business model. If a member of VHT’s key
management personnel were to resign or leave the business this could have an
adverse effect on VHT’s performance; and there is no guarantee that VHT could
attract a suitably qualified replacement, or if it is able to do so, how long it may
take for VHT to attract and employ a suitably qualified replacement.
VHT expects to grow its sales and marketing teams in the US, Asia and Europe
over time. An inability to attract quality sales and marketing personnel may
adversely impact on VHT’s growth plans and its ability to grow revenue.
While VHT has a structured incentive program for its key personnel (refer to
Section 10 for further details) these measures alone may not be sufficient to
retain existing personnel, or to attract new personnel in a timely manner, which
could negatively affect VHT’s ability to reach its goals.
Potentially adverse
effects of healthcare
reform legislation in the
US and other countries
and the impact of
advocacy groups and
sceptics
In recent years, there have been numerous initiatives at the US federal and state
levels for comprehensive reforms affecting the payment for, the availability of
and reimbursement for healthcare services. Recent legislation and many of the
proposed reform bills include funding to assess the comparative effectiveness
of medical devices, being the equipment on which VHT Solutions operates.
It is unclear what impact the comparative effectiveness analysis will have on
VHT’s products or its financial performance. If significant reforms are made to
the healthcare system in the US, or in other jurisdictions, those reforms could
adversely affect VHT’s financial condition and operating results.
Further, the use of breast screening and mammogram is under attack globally by
various advocacy groups and sceptics. If governments listen to these groups and
decide to restrict or cease funding breast screening altogether, this could have a
material adverse impact on VHT’s financial performance.
VHT may not be able
to pass the regulatory
hurdles and gain the
necessary approvals
and clearances to use
its products in certain
jurisdictions
VHT currently has FDA clearance (FDA 510(k)) for its products VolparaDensity
and Volpara Density Map (currently commercially unavailable), and for its quality
controls tool.
However, as VHT seeks to diversify its product range and develop new products,
VHT cannot guarantee that it will receive all necessary regulatory approvals,
nor can VHT accurately predict the product approval timelines, cost or other
requirements that may be imposed by regulators (e.g. clinical trials or other
requirements proving effectiveness of its new products). Further, there may
be changes to regulatory standards, which could delay or prevent VHT from
obtaining the necessary regulatory approvals. In addition, any future changes to
the treatment may require separate clearance or approval.
Any delays or barriers to VHT obtaining necessary regulatory clearances would
limit the size of the market opportunity for the new products until such time (if
any) that VHT was able to obtain such clearances for its new products.
52
TYPE OF RISK
DESCRIPTION OF RISK
Patent rights
The value of VHT’s products depends, in part, on securing rights to the intellectual
property VHT develops. Competition in retaining and sustaining protection of
intellectual property and the complex nature of intellectual property can lead to
expensive and lengthy patent disputes for which there is no guaranteed outcome.
VHT is relying on its ability to obtain and maintain patent protection of its products.
The granting of a patent does not guarantee that the rights of others are not
infringed or that competitors will not develop competing intellectual property that
circumvents such patents. The patent position of medical technology companies
can be highly uncertain and frequently involves complex legal and scientific
evaluation. Therefore, not all patent claims may be allowed and not all patents may
be enforceable. There can be no assurance that any patents VHT owns, controls or
licenses now or in the future will give VHT commercially significant protection of the
intellectual property, or that any of the products that may arise from the intellectual
property will have commercial success. Similar to other companies operating in
the software industry, VHT could fall victim to attempts by a non-practising entity
(commonly referred to as a patent troll) looking to enforce patent rights against
VHT with the sole aim of gaining financial reward through settlement, licensing
or litigation. For further details on VHT’s current patents, read the IP and Patent
Report set out in Section 9.
Infringement of thirdparty intellectual
property rights
VHT does not believe that it is currently infringing any third party’s intellectual
property rights. However, in the future VHT may be subjected to infringement
claims or litigation arising out of patents and pending applications for patents
involving competitors, or additional proceedings initiated by third parties, the US
Patent and Trademark Office, the European Patent Office or other intellectual
property regulators to re-examine the patentability of licensed or owned patents.
VHT itself may be the victim of an infringement of its own patents and other
intellectual property rights.
The defence and prosecution of intellectual property rights lawsuits, proceedings,
and related legal and administrative proceedings are costly and time-consuming
to pursue, and their outcome is uncertain. If VHT infringes the rights of third
parties, VHT could be prevented from selling its products and be forced to defend
litigation and pay damages. Further, there is always a risk of third parties claiming
involvement in, or membership of, technological advances contained in VHT’s
products and, if any disputes arise, they could adversely affect the financial
performance and reputation of VHT.
In addition, under a number of commercial contracts, VHT indemnifies both the
counterparty to the contract, and an end user of its product, against any claims
for an infringement of third-party intellectual property. A successful infringement
claim could have substantial financial and reputational implications on VHT.
Trade secrets
In addition to its patent and licensing activities, VHT also relies on protecting
its trade secrets. The protective measures VHT employs may not always be
sufficient to protect its trade secrets. This could erode its competitive advantage.
VHT also cannot be certain that others will not independently develop similar
technologies on their own or gain access to trade secrets or have disclosed to
them such technology, or that VHT will otherwise be able to meaningfully protect
its trade secrets and unpatented know-how and keep them secret. This could
allow competitors to commercialise products in competition with VHT’s products.
Although VHT implements reasonable endeavours to protect its trade secrets,
these measures may not always be sufficient.
VHT has a limited
number of sales,
marketing and
distribution resources
VHT currently has limited marketing resources and will need to commit significant
resources to developing sales, distribution and marketing capabilities. VHT will
need to ensure compliance with all legal and regulatory requirements for sales,
marketing and distribution in each relevant market. There is a risk that VHT will
be unable to develop sufficient sales, marketing and distribution capacity to fully
realise the commercialisation of its products.
53
5
RISKS
TYPE OF RISK
DESCRIPTION OF RISK
Industry and competition
VHT’s competitors include, and potential competitors may include, companies
with substantially greater resources and access to more markets. Therefore,
competitors may succeed in developing products that are more effective or
otherwise commercially superior to those developed, or being developed, by VHT
or which could render VHT’s products obsolete and/or otherwise uncompetitive.
In addition, VHT may not be able to compete successfully against current or
future competitors where aggressive pricing policies are employed to capture
market share. Such competition could result in price reductions, reduced gross
margins and loss of market share, any of which could materially adversely impact
VHT’s future business, operating results and financial position.
VHT may be subject
to competition from
existing manufacturers
of breast screening
equipment
VHT’s products are designed to operate on most of the leading breast screening
equipment manufactured globally, including equipment manufactured by market
leaders Hologic, GE and Siemens. However, manufacturers such as Hologic also
manufacture their own software, which can be used on their own equipment and
possibly on other manufacturers’ equipment. There is a risk that manufacturers
such as Hologic make it a condition of the sale of their equipment that Hologic
software be used with that equipment, and offer the product for free. This may
make it more difficult for healthcare professionals to adopt VHT’s products and
use them with their equipment, even though VHT can successfully demonstrate
that its products are superior to those being offered by the equipment
manufacturers. If this were to happen, VHT is likely to experience pressure on its
sales, which would impact on its financial performance.
In addition, equipment manufacturers could encrypt the data on their equipment
that is needed for the Volpara Products to operate, therefore making it impossible
for VHT to process images. This risk is somewhat diminished due to global
standards imposed on equipment manufacturers. There may also be legal
reasons that would stop manufacturers being able to take this course of action.
Further, VHT’s VolparaDensity product produces a radiation dose score for each
screening so that the patient is aware of the extent of their exposure to radiation.
Each manufacturer’s equipment tends to give a different radiation dose with some
doses being higher than others. There is a risk that a manufacturer may make a
claim against VHT that its radiation score is not accurate or that it is misleading
and that it is damaging the reputation of that manufacturer. While VHT considers
this risk to be low given that its product calculates radiation doses based on
internationally accepted algorithms, if a claim is made against VHT, VHT may
suffer reputational damage as well as damage to its financial performance.
Further product
development
VHT continues to invest in its product development in order to stay ahead of any
emerging competition. In addition to its VolparaDensity product range, VHT is
developing its VolparaAnalytics product.
Development of new products is expensive due to regulatory and quality
requirements, which have to be met prior to clinical testing, and it is possible that
this expense could hamper VHT’s ability to develop new products.
VHT cannot give any guarantee that further product development will be
successful, that development milestones will be achieved or that VHT’s
intellectual property will be developed into further products that are commercially
exploitable. There are many risks inherent in the development of technologies
and related products, particularly where the products are in the early stages of
development. Projects can be delayed or fail to demonstrate any benefit, or may
cease to be viable for a range of scientific and commercial reasons.
54
TYPE OF RISK
DESCRIPTION OF RISK
Potential clawback of
grant funding
To date VHT has been the recipient of funding under grant and project
agreements that include provisions allowing the funding authority to claim some
or all of that funding back if VHT fails to comply with the terms of the relevant
agreement or in some cases enters into a contract that would, in the reasonable
opinion of the funder, materially reduce the benefit to New Zealand anticipated
from the project that was the purpose of the initial grant or funding.
VHT is aware of its obligations under its funding agreements and is not currently
aware of any action or event that could lead to a funder threatening a clawback.
Risks associated
with possible future
acquisitions
As part of its business strategy, in the future VHT may make acquisitions or
significant investments in complementary companies, products or technologies.
No such acquisitions or investments are currently planned. Any such future
transactions would be accompanied by the risks commonly encountered
in making acquisitions of companies, products and technologies, including
integration risk.
VHT may be involved
in litigation or other
disputes
VHT may be involved from time to time in disputes or claims, including medical
indemnity, product liability or breach of contract disputes or claims, with current
or former customers and/or their patients. These disputes or claims may lead to
legal and other proceedings, and may cause VHT to suffer additional costs.
If future litigation, or threatened litigation, against VHT were to result in damages
being awarded against VHT, it could have an adverse impact on the financial
performance, position and future prospects of VHT.
VHT may also have disagreements with regulatory bodies in the course of its
operations that could result in its accreditations being revoked. This may prevent
VHT from claiming benefits from the relevant medical regulator that regulates the
various jurisdictions in which VHT operates.
5.3 General risks
In addition to the specific risks outlined above, the operating results and profitability of the Company are
sensitive to a number of general risk factors including those set out below.
The list of risk factors below should be carefully considered, together with the information contained elsewhere
in this Prospectus, before deciding to apply for Shares.
TYPE OF RISK
DESCRIPTION OF RISK
Government and
regulatory risk
Changes in government, fiscal, monetary, environmental, taxation, regulatory
policies and other laws may also affect the business of VHT. The market in which
VHT provides products or services is subject to significant regulation which may
increase or be changed by governmental or other regulatory authorities in the
future. Changes to the regulatory framework could impact on VHT and the industry
in which it operates generally, and could result in an adverse impact on the financial
position, performance, assets and operations of VHT.
Tax treatment on an
investment in Shares
The tax treatment of an investment in Shares will differ depending on each
Investor’s personal circumstances. Investors should seek their own taxation
advice in respect of the investment into VHT.
Capital raising
The Directors give no assurances that the objectives of VHT outlined in this
Prospectus will be met. The capital raising described in this Prospectus is
intended to raise sufficient funds to fund expansion in sales and marketing
activities, product and cloud development and working capital.
55
5
RISKS
TYPE OF RISK
DESCRIPTION OF RISK
Income and capital risk
An investment in the Shares is considered to be speculative in nature and the
capital contributed and the returns projected are not guaranteed by VHT, its
Directors, officers or any other person. The speculative nature of the investment
poses a risk and the capital may not be returned.
Taxation
VHT is subject to various forms of taxation including but not limited to PAYG,
GST and resident and non-resident withholding tax. An increase, change in the
application, or introduction of a new tax could materially affect the performance and
financial position of VHT.
General economic and
share market risk
The performance of VHT, in common with other companies, is subject to general
economic conditions, movements in interest and inflation rates, prevailing global
commodity prices and currency exchange rates which may have an adverse
effect on VHT’s activities, as well as its ability to fund those activities.
Further, share market conditions may affect the value of VHT’s quoted securities
regardless of VHT’s operating performance. Share market conditions can be
affected by many market factors such as:
• general economic outlook;
• interest rates and inflation rates;
• currency fluctuations;
• changes in investor sentiment towards equities or particular market sectors;
• political instability;
• short selling and other trading activities;
• the demand for, and supply of, capital; and
• force majeure events.
The market price of the Shares can fall as well as rise and may be subject to
varied and unpredictable influences on the share market. The trading price of the
Shares at any given time may be higher or lower than the price paid under the
Offer. Further, you may be unable to sell or realise your investment because the
market for Shares may be illiquid.
Currency risk
Movements in currency exchange rates may have an adverse effect on the
Company’s activities, as well as on its ability to fund those activities. In particular,
the Company currently sources a significant proportion of its income from
the US. VHT’s financial position may be substantially affected by future US$
currency exchange fluctuations as well as currency exchange fluctuations in other
jurisdictions in which the Company operates.
Product liability
insurance
VHT is exposed to potential product liability risks that are inherent in the research
and development, manufacturing, marketing and use of its products.
VHT has product liability and professional indemnity insurance which the
Directors consider is adequate at this time. However, there can be no assurance
that adequate or necessary insurance coverage will continue to be available at
an acceptable cost or in sufficient amounts, if at all, or that product liability or
other claims would not materially and adversely affect the business or financial
condition of VHT (for instance, because the amount of such claims exceeds the
level of insurance).
Legal risk
56
VHT is exposed to the risk of changes to the applicable laws and/or the
interpretation of existing laws which may have a negative effect on VHT, its
investments and/or returns to Shareholders or the risks associated with noncompliance with these laws (including reporting or other legal obligations). Noncompliance may result in financial penalties being levied against VHT.
TYPE OF RISK
DESCRIPTION OF RISK
Dividend risk
VHT has not to date paid any dividend on its ordinary shares. There is no
certainty that VHT will pay dividends in the future.
Force majeure
Events may occur within or outside Australia and New Zealand that could impact
upon the global and/or Australian and New Zealand economies, the operations of
VHT and the price of its Shares. Such events include, but are not limited to, acts
of terrorism, cyber hostilities, outbreaks of international hostilities, fire, floods,
earthquakes, labour strikes, civil wars, natural disasters, outbreaks of disease
or other natural or manmade events or occurrences that can have an adverse
effect on the demand for VHT’s products and its ability to conduct business. VHT
cannot insure against all risks.
The above lists of risk factors should not to be taken as exhaustive of the risks faced by the Company or by
Investors in the Company. The above factors, and others not specifically referred to above, may in the future
materially affect the financial performance of the Company and the value of the Shares.
You should consult your stockbroker, solicitor, accountant, financial adviser or other professional adviser before
deciding whether to apply for the Shares.
57
6
58
DIREC TOR S , K E Y PEOPLE A ND
CORP OR ATE GOVERN A NCE
6
DIRECTORS, KEY PEOPLE AND CORPORATE GOVERNANCE
6.1 Board of Directors
NAME
EXPERTISE, EXPERIENCE AND QUALIFICATIONS
Roger joined the Board in June 2010 and was appointed Chairman in October 2015.
Roger is a highly experienced entrepreneur and investor in early-stage growth
companies in Australia and internationally. He built Computer Power Group (CPG) in
the 1970s from a small start-up to a worldwide group of 3,000 people operating from
50 offices in 12 countries, listing on the ASX in 1987. In 1996 he co-founded Allen
& Buckeridge, an early-stage venture capital fund with offices in Silicon Valley and
Australia. He is dedicated to social entrepreneurship, especially to enterprises focused
on indigenous economic development and digital health.
Roger Allen AM
Chairman
BA (Hons), FACS
Roger has served on two Prime Ministers’ Science and Technology Councils and
Advisory Boards, and was Deputy Chairman of Austrade from 1990 to 1997. Currently
an adjunct professor in the Business School of the University of Technology Sydney,
he has also lectured occasionally at the School of Entrepreneurship at INSEAD. Roger
has been awarded the top two lifetime awards in the IT industry (CSIRO Tony Benson
award and the Pearcey Medal for lifetime achievement) as well as an Order of Australia
Honour for his services to the IT sector through leadership roles, venture capital
investment and professional development, and in recognition of his support of the
indigenous community and philanthropic interests. He is based in Sydney, Australia.
Roger has been an investor in VHT since 2010 and indirectly holds, or has a relevant
interest in, 20,467,848 Shares and 300,000 options.
Ralph, a founding Director and Shareholder of VHT, has been at the forefront of
the digital breast imaging field for over 25 years. Initially a research scientist at the
University of Oxford, Ralph’s innovative work in quantitative breast imaging technology
led him to form first OXIVA Limited and then Mirada Solutions with Professor Sir John
Michael Brady. Under Ralph’s leadership Mirada became the number-one provider of
image registration and fusion tools before being acquired by CTI Molecular Imaging Inc.
and later Siemens Medical Solutions USA, Inc.
Ralph Highnam
Executive Director
and CEO
BSc (Hons) 1st Class,
MSc, PhD
Before founding VHT in 2009, Ralph consulted for many of the world’s top medical
imaging companies, including R2, Siemens, Hologic and Dexela, as well as many
leading breast screening programs. During this time, he continued his academic
research as part of an international circle of collaborators.
Ralph is the author of numerous articles and, with Brady, the seminal book
Mammographic Image Analysis. As CEO of VHT, Ralph is dedicated to providing the
most accurate measurements possible of breast composition (“breast density”) in order
to improve the health outcomes of women around the world. Based in Wellington, New
Zealand, in 2015 he was named a Wellingtonian of the Year finalist.
Ralph has been an investor in VHT since its formation in 2009 and holds, or has a
relevant interest in, 15,632,298 Shares and 3,148,336 options.
Mike, a founding Director and Shareholder of VHT, is currently Professor of Oncological
Imaging at the University of Oxford, having recently retired after 25 years as Professor of
Information Engineering. He served for 20 years as a Non-Executive Director and Deputy
Chairman of the FTSE 250 company Oxford Instruments plc and for 10 years as a NonExecutive Director of AEA Technology plc.
Professor Sir John Michael
(Mike) Brady
FRS, FREng, FMedSci,
HonFIET, FInstP, FBCS,
PhD
Mike is founding Director of Perspectum Diagnostics, which performs liver image analysis
by MRI, and Mirada Medical Limited, which develops medical image analysis software
and is installed in almost 2000 hospitals worldwide. He is also Co-Director of the Oxford
Cancer Imaging Centre, one of four national cancer imaging centres in the UK.
Mike is the author of over 750 articles and 26 patents in computer vision, robotics, medical
image analysis and artificial intelligence, and the author or editor of 10 reference books.
He is based in Oxford, UK.
Mike has been an investor in VHT since its formation in 2009 and holds, or has a relevant
interest in, 7,919,211 Shares and 300,000 options.
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6
NAME
John joined the VHT board in early 2015 with more than 25 years of medical device
experience as an executive and company director, John currently serves as the
President and CEO of VytronUS, Inc., a venture-backed start-up using novel catheter
technology to treat atrial fibrillation, a cardiac arrhythmia.
John Pavlidis
BS, MS
Prior to VytronUS, John was the President and CEO of Endoscopic Technologies,
Inc., a leader in minimally invasive and endoscopic treatment of atrial fibrillation. Since
2007, John has also served on the board of directors of several health technology
start-up companies, including U-systems, Inc., which pioneered automated breast
ultrasound imaging as an adjunct to mammography for breast cancer screening and
was acquired by GE Healthcare in 2012.
Previously, John served as President and CEO of R2 Technology Inc., the pioneer
and leader in computer-aided detection of breast cancer, until Hologic Inc. acquired
the company in 2006. Before joining R2 Technology, John was the president of the
Ultrasound group at Siemens Healthcare, where he led the acquisition and integration
of Acuson and subsequent growth of that company to $1 billion in revenue. He is
based in Silicon Valley, California.
John holds, or has a relevant interest, in 451,872 options.
John is the principal of an Australian CPA firm that provides companies with corporate
advisory services. John has extensive knowledge and practical experience in the
application of Australian corporations law, ASX Listing Rules, international accounting
standards and corporate governance principles.
John Diddams
Over the past 25 years John has managed the processes to raise capital, perform due
diligence and seek ASX listing for a number of enterprises, including IPOs for a wide
range of offerings. These include oil and gas interests, food and retail, a fine wool
processing plant, an innovative telephony product, a biotech company, an Internet
advertising initiative, a dental device for snoring and sleep apnoea, and most recently
an indoor skydiving company and the NZ developer of the Martin Jetpack.
B Com, FCPA, FAICD
John is currently a Non-Executive Director of ASX-listed Skydive the Beach Group
Limited, an adventure tourism business operating in Australia and New Zealand.
John is also a Non-Executive Director and deputy chair of House with No Steps, a notfor-profit organisation that supports 3,000 people to make the most of their abilities.
He is based in Sydney, Australia.
John holds, or has a relevant interest in, 253,014 Shares and 1,320,000 options.
Lyn joined the Board in December 2015. Lyn is a prominent women’s advocate,
inspirational speaker and long-standing spokesperson on behalf of Australians
personally affected by cancer. Following her own diagnosis and treatment for breast
cancer, in 1998 Lyn founded Breast Cancer Network Australia (BCNA), the peak
national breast cancer consumer organisation with more than 110,000 members.
The creator of the Field of Women concept, Lyn led the development of BCNA’s Seat
at the Table program, which provides trained and supported consumer representatives
at advisory and decision-making forums nationally. She has been an invited public
speaker at medical conferences globally and across Australia.
Lyn Swinburne AM
Hon Doc (Social Sciences)
Lyn has received numerous awards for her work: in 2006 she was named an Australian of
the Year finalist and appointed a Member of the Order of Australia, and in 2007 she was
named Melburnian of the Year. More recently she was awarded an Honorary Doctorate
from Swinburne University for advancing the cause of women affected by breast cancer.
She has been appointed to a number of boards, including the National Breast and
Ovarian Cancer Centre and Cancer Australia, by various national Health Ministers.
Lyn retired from her role as CEO of BCNA at the end of 2011 and is currently Chair of the
Board of the Royal Women’s Hospital in Melbourne. She is based in Melbourne, Australia.
Lyn holds, or has a relevant interest in, 450,000 options.
60
6.2 Senior Management
NAME
Dr Ralph Highnam
See Section 6.1.
Chief Executive Officer and
Chief Scientist
BSc (Hons) 1st Class,
MSc, PhD
Mark is a medical industry executive who has led companies in the medical imaging,
software and medical device space for over 27 years.
Mark has extensive commercial experience working with both start-up and established
companies, leading high-performance teams and launching new products in domestic
and international markets. Mark started his career at GE Healthcare and took on
roles of increasing responsibility in marketing and sales, operations and finance. His
executive global leadership roles include those at Cardioptimus, Estech, Ziosoft, R2
Technology and Stereotaxis.
Mark Koeniguer
Chief Commercial Officer
BSc, MBA
More recently, Mark was Chief Commercial Officer at UL Workplace Health and
Safety, a global leader in e-learning and electronic medical record software supporting
the occupational healthcare industry. He is based in Nashville, Tennessee.
Julian is a breast imaging expert of 30 years’ experience whose breadth of knowledge
spans all major areas of the medical imaging industry.
Julian Marshall
Chief Marketing Officer
BS, MS
Initially a software developer and consultant for Sun Microsystems, Julian ran Alpine
Image Systems for 8 years before joining companies like R2 Technology, acquired by
Hologic in 2006. At R2 and Hologic he held leadership roles in software and hardware
development, marketing and product management. In this last capacity he continued
his work in product innovation for Hologic, where he served in several director-level
positions. He led the team responsible for managing all of Hologic’s breast imaging
products, including tomosynthesis, before moving to Hologic’s Global Strategic
Innovation group.
An engineer by training, Julian holds numerous patents in computer-aided detection
and breast imaging, including user interface design, and has worked in cardiac
ultrasound, digital subtraction angiography, image processing and mammography. He
is based in San Francisco, California.
David has been a member of the VHT management team since 2011 and has 25
years of experience in the medical device industry. After eight years in Europe in
engineering roles for GE Healthcare, David was Director of Product Development
for TomoTherapy Incorporated, a US-based start-up that developed a medical linear
accelerator (and subsequently was NASDAQ listed and acquired by Accuray). He also
worked as a freelance medical device consultant, primarily in the US, helping to bring
new devices to market and improving the DICOM capabilities of existing ones.
David Murray
Chief Technology Officer
MSc, PhD
David is an expert in medical device integration and the DICOM medical
communication standard, serving for over 10 years as chair of DICOM Working Group
7 (Radiation Therapy), an international standards organisation for medical device
communication in radiation therapy. He is based in Wellington, New Zealand.
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6
NAME
Brian has been a member of the VHT management team since 2010. He has 40 years’
experience in senior financial management, including positions in New Zealand with
Hewlett Packard, Spark (previously Telecom New Zealand Limited) and No 8 Ventures
Management Limited.
Brian Leighs
Chief Financial Officer
BCA, CA
Brian was a member of the Energy Reform Unit of the Victorian State Government during
the privatisation program of the electricity and gas industries. He also held roles as
Establishment CEO and director of Multinet Gas and Ikon Energy, and was a member of
the board of VENcorp. He project managed the sale of Hazelwood Power Station and
Loyang A power station.
Brian also project managed the establishment of Genesis Energy as part of the
disaggregation of Electricity Corporation of New Zealand, setting up its retail operation
activities, the largest in New Zealand. He has previously advised the Asian Development
Bank on several Asian energy development projects.
In addition to his current role at VHT, Brian holds directorships on two other health
technology companies. He is based in Wellington, New Zealand.
David has nearly 30 years of sales experience in the medical imaging field, specifically
in breast imaging and channel sales.
Before joining VHT’s management team in 2012, David served as Vice President of
Channel Sales for Carestream Health, where he was responsible for channel sales for
digital imaging equipment and x-ray film in the US. Previously, he held sales positions
with Fuji Medical Systems USA and R2 Technology, the breast computer-aided
detection company. He is based in Rochester, New York.
David Mezzoprete
VP Sales, North America
Don is a veteran medical devices professional with over 25 years of experience in
international sales and marketing. The former head of Siemens’ Women’s Health
business segment in the US, Don innovated a number of industry firsts, including the
first PC-based teleradiology, first desktop-based computed radiography, first PC-based
3D workstation, first server-based lung computer-assisted detection and first sales of
Siemens digital mammography in the US. He joined VHT’s management team in 2012.
Don has also held high-level positions with Asia Pacific Medical Devices and
Raytheon Systems (EMED). He is based in northern Thailand.
Don Alvarez
VP Sales, EMEA and APAC
BA, MA
Ian has over 20 years of experience in medical devices and diagnostic imaging,
including quality management systems.
Ian spent 14 years with the UK Department of Health Scientific and Technical Branch,
where he undertook commissioning audits of new installations of NHS diagnostic
imaging equipment, investigated safety incidents and, under the DHSS Manufacturer
Registration Scheme, audited supplier quality management systems.
In 1988 Ian became the first Quality Manager for Bureau Veritas Quality International, a
major accredited certification body including certified ISO 9001 quality management system.
Ian Hendra
Quality and Regulatory
Manager
MCQI, CQP, IEng, FIHEEM
In 1992 Ian emigrated to New Zealand to set up the first accredited certification body
in the Southern Hemisphere, including substantial client contact as a quality systems
auditor. Later he served as Manager Audit Compliance at the Airways Corporation of
New Zealand, working in the highly regulated civil aviation sector.
Ian now manages his own consultancy and has provided regulatory services to VHT
since 2011. He is based in Wellington, New Zealand.
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NAME
Penelope combines qualifications in intellectual property law with over 20 years
of commercial experience. She has set up successful enterprises, which involved
the creation, acquisition and exploitation of IP rights, and served as Director of an
international group, where she pioneered new models for use of IP rights.
Penelope is listed among the world’s top IP strategists, her advisory work with highgrowth, technology SMEs cited as “best practice” by the UK government.
Penelope Gibson
Intellectual Property
Manager
PhD (law), MPhil, MSc,
Certificate of Law, BA Jnt
Hons
In 2008 Penelope set up QUEDO, a consultancy specialising in management of
innovation, intellectual property, investment and international commercialisation;
clients now include investors and technology companies in Europe, the US,
Australasia, China and Russia.
Penelope’s professional memberships include the International Licensing Executives
Society (MLESI), Chartered Institute of Linguists and Royal Society (New Zealand).
She has been a regular speaker at APEC forums since 2011, and her papers are used
in universities in the US and China.
Penelope has been an IP consultant to VHT since 2009. She is based in Bordeaux,
France.
6.3 Scientific Advisory Board
The VHT Scientific Advisory Board was set up in 2010 and comprises Dr Highnam, Professor Brady and two of
the original pioneers in breast cancer detection, both of whom were instrumental in the establishment of VHT
and remain as Shareholders in the Company today:
NAME
Nico is one of the pioneers of computer-aided detection and played a key role in its
development and adoption. A professor in the Department of Radiology, Radboud
University, Nijmegen, the Netherlands, Nico was instrumental in having the Dutch
Breast Screening Program incorporate VolparaDensity into a demonstration project,
and more recently running the large multi-country EU ASSURE project.
Professor Nico
Karssemeijer
Martin is a world-leading medical physicist who consults for and carries out research
with many of the world’s major medical imaging companies. He is responsible for
much of the pioneering work on quantitative breast imaging. Well known to radiologists
and radiographers around the world, Martin has contributed to VHT by performing
crucial work on x-ray physics and providing voluminous medical imaging data. Martin
continues to teach at the University of Toronto.
Professor Martin Yaffe CM
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6
6.4 Medical Advisory Board
The VHT Medical Advisory Board was set up in 2010 and comprises a number of medical practitioners that are
leaders in their field of breast cancer detection. In addition, VHT may draw on a wider set of advisers depending
upon the specific question or advice sought.
NAME
Professor Harvey, University of Virginia, is a practising breast radiologist and an
expert in the evaluation of breast density and breast cancer risk analysis.
Professor Jennifer Harvey
Dr Schroeder, Greenville, North Carolina, is a leading breast imaging specialist and
entrepreneur, constantly innovating and pushing the boundaries with new technology
so that women receive the best healthcare possible.
Dr Bruce Schroeder
Professor den Heeten is recently retired Director of the Dutch National Expert and
Training Centre for Breast Cancer Screening. He continues to work at the Amsterdam
Medical Center while remaining involved in entrepreneurial activities with small
companies in the radiology space.
Professor Ard den Heeten
Dr Namba is Director of the Breast Cancer Center at Hokuto Healthcare Group in
Japan. He is a practising surgeon who also advises on optimal breast healthcare
system setups and works on the advisory board of several major companies.
Dr Kiyoshi Namba
6.5 Interests and benefits
1.Interests of Directors
Other than as set out below or elsewhere in the Prospectus, no Director or proposed Director:
a) has as at the Prospectus Date, or had at any time during the two years prior to the Prospectus Date, any
interest in:
(i) the formation or promotion of the Company;
(ii) any property acquired or proposed to be acquired by the Company in connection with its formation or
in connection with the Offer; or
64
(iii) the Offer; and
b) has been paid or agreed to be paid any amount, or has been given or agreed to be given any other
benefit, by any person, either:
(i) to induce him or her to become, or to qualify him or her as, a Director; or
(ii) for services provided by him or her in connection with the formation or promotion of the Company or in
connection with the Offer.
2.Key Executive Remuneration - Ralph Highnam – Chief Executive Officer
Ralph Highnam is employed by the Company in the role of both Chief Executive Officer and executive Director.
Under Dr Highnam’s employment agreement, his total remuneration will comprise:
a) a gross annual salary of NZ$280,000;
b) the potential for an annual bonus of up to NZ$150,000, subject to the level of satisfaction of budgeted
revenue targets achieved; and
c) a one-time grant of 600,000 options which will vest as follows:
(i) 240,000 at the date that is 24 months from the granting of the options;
(ii) 120,000 at the date that is 36 months from the granting of the options;
(iii) 120,000 at the date that is 48 months from the granting of the options; and
(iv) 120,000 at the date that is 60 months from the granting of the options.
Dr Highnam will not receive any additional payments for performance of his role as an executive Director on the Board.
Either the Company or Dr Highnam may terminate the employment by providing 6 months’ written notice.
Dr Highnam’s remuneration and performance may be reviewed at the Company’s discretion.
The Company may terminate Dr Highnam’s employment immediately for serious misconduct. Dr Highnam may
under certain circumstances be subject to a post-employment restraint for a period of up to 6 months.
3.Non-Executive Directors’ remuneration
It has been resolved that the total aggregate amount to be paid to the Directors (excluding any Executive
Director) is NZ$500,000 per annum. Under the ASX Listing Rules, any increase to that aggregate annual amount
will need to be approved by Shareholders. The Company does not utilise that full amount based on its current
Board of Directors.
The annual remuneration of the Board of Directors to be paid by the Company following admission to the ASX is
as follows:
Director Remuneration
DIRECTOR
BOARD FEES (NZ$)
COMMITTEE FEES (NZ$)
$80,000
$10,000
(Member – Audit Committee)
Included in
Employment Contract
nil
Sir John Michael Brady,
$50,000
n/a
John Pavlidis,
$55,000*
n/a
John Diddams,
$50,000
$20,000
(Chair – Audit Committee)
Lyn Swinburne,
$50,000
$10,000
(Member – Audit Committee)
Roger Allen, Chairman and
Ralph Highnam,
Executive Director and CEO
*John Pavlidis’s contract stipulates US$40,000 per annum.
In addition to their annual remuneration, the Directors may also be reimbursed for expenses properly incurred
by the Directors in connection with the affairs of the Company including travel and other expenses. There are no
retirement benefit schemes for Non-Executive Directors.
65
6
4.Directors’ deeds of indemnity
The Company has entered into deeds of indemnity with each Director (the Deeds). In accordance with the
Constitution, under the Deeds the Company indemnifies each Director against (i) any “Costs” (as that term is
defined in the Deeds) incurred by the Director in any proceeding that relates to liability for any act or omission
made by the Director as an officer of the Company or a “Related Company” (as that term is defined in the
Deeds) and in which judgment is given in the Director’s favour or in which the Director is acquitted or which
is discontinued; (ii) any liability to any third party for any act or omission by the Director as an officer of the
Company or a “Related Company” (as that term is defined in the Deeds); and (iii) any “Costs” (as that term is
defined in the Deeds) incurred by the Director in defending or settling any claim or proceeding to any Costs or
liability of the nature referred to in (i) and (ii).
The Directors are indemnified under the Deeds for the entirety of their term as Director and for 7 years from the
date of the Director’s retirement or removal or ceasing to hold office.
Under the Constitution, the Company may pay a premium for a contract insuring a person who is or has been a
Director against costs and certain liabilities incurred by the person as a Director. Under the Deeds, the Company
must obtain insurance for a minimum of NZ$3,000,000 during each Director’s period of office and for a period of
7 years after a Director ceases to hold office.
5.Directors’ interests in Shares and other securities
As at the Prospectus Date the interests of the Directors or their associates in the Shares and options issued by
the Company is set out below:
Director Shares and other securities
SHARES
OPTIONS
FINAL EXERCISE
DATE
EXERCISE PRICE
(NZ$)
Roger Allen, Chairman and
Non-Executive Director (1)
20,467,848
300,000
24/01/2023
$0.54
Ralph Highnam, Executive
Director and CEO
2,548,336
06/01/2021
$0.003
15,632,298
600,000
24/01/2023
$0.54
DIRECTOR
Sir John Michael Brady,
7,919,211
300,000
24/01/2023
$0.54
John Pavlidis,
nil
451,872
01/02/2025
$0.467
253,014
1,320,000
31/10/2025
$0.0003
nil
450,000
01/01/2026
$0.467
John Diddams,
Non-Executive Director (2)
Lyn Swinburne,
Notes:
1. Roger Allen has a relevant interest in Shares held by Patagorang Pty Ltd, an entity controlled by him.
2. John Diddams has a relevant interest in Shares and options held by Whitfield Investments Pty Ltd, an entity
controlled by him.
6.Interests of advisers
Other than as set out below, no person named in this Prospectus as providing professional or advisory services
in connection with the preparation of this Prospectus or any firm in which any such person is a partner:
• has or had at any time during the two years preceding the date of the Prospectus, any interest in the
formation or promotion of the Company, or in any property acquired or proposed to be acquired by the
Company or the Offer; or
• has been paid or agreed to be paid any amount or given or agreed to be given any other benefit for services
rendered by them in connection with the formation or promotion of the Company or the Offer.
66
Morgans Corporate Limited has acted as Lead
Manager to the Offer. VHT has paid, or agreed to pay,
the Lead Manager the fees set out in Section 10.8.3 in
respect of these services.
RSM has acted as the Australian Investigating
Accountant to the Company and provided the
Investigating Accountant’s Report on Pro Forma
Financial Information in Section 8. The Company has
paid or agreed to pay an amount of approximately
A$53,000 (plus disbursements and GST) in respect of
these services. Further amounts may be paid to RSM in
accordance with time-based charges.
Simmonds Stewart has acted as the New Zealand
legal adviser to the Company and performed work in
relation to due diligence enquiries on the Company and
New Zealand legal matters. The Company has paid or
agreed to pay an amount of approximately $160,000
(plus disbursements and GST) in respect of these
services. Further amounts may be paid to Simmonds
Stewart in accordance with time-based charges.
Norton Rose Fulbright Australia has acted as
the Australian legal adviser to the Company and
performed work in relation to Australian legal matters.
The Company has paid or agreed to pay an amount
of approximately A$200,000 (plus disbursements and
GST) in respect of these services. Further amounts
may be paid to Norton Rose Fulbright Australia in
accordance with time-based charges.
Deloitte has acted as the auditor to the Company.
The Company has paid or agreed to pay an amount of
approximately $25,000 (plus disbursements and GST)
in respect of these services. Further amounts may be
paid to Deloitte in accordance with time-based charges.
Spruson & Ferguson has provided the IP Report
in Section 9. The Company has paid or agreed to
pay an amount of approximately A$18,000 (plus
disbursements and GST) in respect of these services.
6.6 Corporate governance
This Section explains how the Board will oversee the
management of the Company’s business. The Board
is responsible for the overall corporate governance of
the Company. The Board is responsible for, and has the
authority to determine, all matters relating to the strategic
direction, policies, practices, management goals and the
operations of VHT.
VHT has in place corporate governance practices which
are formally embodied in corporate governance policies
and codes adopted by the Board (Policies). The aim of
the Policies is to ensure that VHT is effectively directed
and managed; risks identified, monitored and assessed;
and appropriate disclosures made.
The ASX Corporate Governance Council has developed
and released corporate governance recommendations
for Australian listed entities in order to promote investor
confidence and to assist companies to meet stakeholder
expectations (ASX Recommendations). The ASX
Recommendations are not prescriptions but guidelines.
In preparing the Policies, the Directors considered the
ASX Recommendations. The Directors incorporated the
ASX Recommendations into the Policies to the extent
the Directors considered the ASX Recommendations
were appropriate taking into account VHT’s size, board
structure, resources and activities.
Under the ASX Listing Rules, the Company will be
required to provide a Corporate Governance Statement
on its website or in its annual report disclosing the extent
to which it has followed the ASX Recommendations
in the reporting period. Where the Company does not
follow an ASX Recommendation, it must identify the ASX
Recommendation that has not been followed and give
reasons for not following it. Except as set out in Section
6.6.10 below, the Board does not anticipate that the
Company will depart from the ASX Recommendations,
however it may do so in the future if it considers that
such a departure would be reasonable.
Details of the Policies will be available from Listing at
www.volparasolutions.com and are summarised below.
1.Board of Directors
Roger Allen, Professor Sir John Michael Brady,
John Pavlidis, John Diddams and Lyn Swinburne
are Non-Executive Directors who are not a part of
the Company’s management. The Board reviews the
independence of each Director in light of interests
disclosed to the Board from time to time. The Board
Charter sets out guidelines of materiality for the
purpose of determining independence of Directors
in accordance with the ASX Recommendations and
includes a definition of independence that is largely
based on that set out in the ASX Recommendations.
The Board considers qualitative principles of materiality
for the purpose of determining “independence”
on a case-by-case basis. The Board will consider
whether there are any factors or considerations which
may mean that the Director’s interest, business or
relationship could, or could be reasonably perceived to,
materially interfere with the Director’s ability to act in
the best interests of the Company.
The Board considers that each of John Pavlidis, John
Diddams and Lyn Swinburne is free from any business
or any other relationship that could materially interfere
with, or reasonably be perceived to interfere with, the
independent exercise of her or his judgement and
each of them is able to fulfil the role of an independent
Non-Executive Director for the purpose of the ASX
Recommendations.
Given the guidelines adopted by the Company
regarding the independence of Directors, both Roger
Allen and Professor Sir John Michael Brady are not
considered by the Board to be independent as they
each are taken to be substantial Shareholders in the
Company, having an interest in Shares in excess of 5%.
Accordingly, as at the date of Official Quotation, the
Board will consist of a total of six Directors, including
five Non-Executive Directors, of which three are
independent Directors. While this does not comply with
the ASX corporate governance recommendation for a
listed entity to have a majority of independent Directors,
67
6
the Board considers the existing Board composition to
be appropriate for VHT at this time, taking into account
VHT’s size, resources and activities.
2.Board Charter
The Board has adopted a Board Charter which
sets out the responsibilities of the Board in greater
detail. It envisages that the Board should comprise
Directors with a range of skills, expertise, experience
and diversity which are relevant to the Company’s
business and the Board’s responsibilities. The charter
provides for the Board to delegate specific matters to
senior management, or to committees established by
the Board. However, ultimate responsibility for strategy
and control rests with the Directors.
The composition of the Board, its performance and
the appointment of new Directors will be reviewed
periodically by the Board, taking advice from external
advisers where considered appropriate.
3.Code of Conduct
The Board has approved a Code of Conduct to
guide compliance with legal and other obligations
to the Company’s stakeholders and which sets
ethical standards for the Volpara Group personnel
and reflects the Directors’ intention to ensure that
their duties and responsibilities of all staff to the
Company are performed with the utmost integrity. The
Company considers its stakeholders to be employees,
Shareholders, patients, creditors, customers,
suppliers, contractors, consultants, governmental
and nongovernmental organisations, the communities
where the Company or its subsidiaries operate
and other parties that have influence over or are
influenced by the Company or its subsidiaries. The
Code of Conduct outlines the Company’s employees’
obligations and explains how the code interacts with
the Company’s other Policies. Responsibilities include
using the Company’s resources in an appropriate
manner, protecting confidential information and
avoiding conflicts of interest.
4.Board committees
In order to better manage its responsibilities, the
Board has established an Audit and Risk Committee,
which has adopted a charter approved by the Board,
setting out its responsibilities.
The Board has determined not to establish a
Nomination and Remuneration Committee as
the Board considers that such a committee is
not necessary and would be burdensome at this
time given the role such a committee would play
and the Board’s current size and composition.
The Board considers that it collectively has the
appropriate balance of skills, knowledge, experience,
independence and diversity to enable it to discharge
its duties and responsibilities effectively in considering
the matters that would otherwise be considered by
that committee. The Board will keep this matter under
review and, if deemed desirable or necessary, may
constitute a Nomination and Remuneration Committee
at an appropriate time in the future.
68
Other committees may be established by the Board as
and when required. Membership of Board committees
will be based on the needs of the Company, relevant
legislative and other requirements and the skills and
experience of individual Directors.
Audit and Risk Committee
The purpose of the Audit and Risk Committee is to
assist the Board in fulfilling its statutory, corporate
governance and oversight responsibilities by
monitoring and reviewing the integrity of financial
statements; the effectiveness of internal financial
controls; the independence, objectivity and
performance of external auditors; and the policies on
risk oversight and management.
The role and responsibilities, composition and
membership requirements of the Audit and Risk
Committee are documented in an Audit and Risk
Committee Charter approved by the Board.
The independent auditors will have a direct line of
reporting to the Committee and have clear and open
access to members of this Committee.
The Company does not currently have an internal audit
function in place. The Audit and Risk Committee Charter
puts in place processes to monitor the Company’s
financial and risk management procedures and the
Board currently considers these processes appropriate
for the size and level of operations of the Company.
The Audit and Risk Committee Charter provides
that the committee should comprise, to the extent
practicable given the size and composition of the
Board from time to time, at least three members, each
of whom are Non-Executive Directors, and a majority
of whom are independent. To the extent practicable,
the chair of the committee shall be an independent
Non-Executive Director who is not the Chairman.
The Audit and Risk Committee is comprised of John
Diddams (Chair), Roger Allen and Lyn Swinburne,
all of whom are Non-Executive Directors and two of
whom, including the Chair, are independent Directors.
5.Risk management policy
The identification and proper management of the
Company’s risks are an important priority of the
Board. The Company has adopted a risk management
policy appropriate for its business (which is reflected
in the Audit and Risk Committee’s Charter). This
policy highlights the risks relevant to the Company’s
operations and the Company’s commitment to
designing and implementing systems and methods
appropriate to minimise and control its risks. The
Board is responsible for overseeing and approving
risk management strategy and policies. The Board
has delegated to the Audit and Risk Management
Committee responsibility for identifying major risk
areas and monitoring risk management to provide
assurance that major business risks are identified,
consistently assessed and appropriately addressed.
The Company will regularly undertake reviews of
its risk management procedures to ensure that it
complies with its legal obligations.
6.Continuous Disclosure Policy
The Company’s Continuous Disclosure Policy
is designed to ensure compliance with the ASX
Listing Rules disclosure requirements and imposes
obligations and procedures on all Directors and
employees of the Company to ensure the timely and
balanced disclosure of all material matters concerning
the Company.
The Board aims to ensure that Shareholders and
stakeholders are informed of all major developments
affecting the Company’s state of affairs. As such, the
Company has adopted this Continuous Disclosure
Policy and a Shareholder Communication Policy,
which together establish procedures to ensure that
Directors and senior management are aware of, and
fulfil their obligations in relation to, providing timely,
full and accurate disclosure of material information
to the Company’s stakeholders and comply with the
Company’s disclosure obligations under the ASX
Listing Rules.
7.Shareholder Communications Policy
The Company’s Shareholder Communication Policy
is designed to facilitate full and open communication
with its Shareholders, observing the highest
standards in corporate governance and shareholder
communications. As a publicly listed company, the
Company has obligations under the ASX Listing Rules
to keep the market fully informed of all information
which may have or could be expected to have a
material effect on the price or value of its securities.
The Shareholder Communication Policy is designed
for strict compliance with these requirements.
The Board aims to ensure that all Shareholders are
kept informed of all material developments affecting
VHT’s business. Information will be communicated to
Shareholders through announcements to ASX, VHT’s
annual report, annual general meetings, half yearly
and full year results, and VHT’s website,
www.volparasolutions.com. The Company Secretary
has been appointed as the person primarily
responsible for managing external communications
with ASX.
As a New Zealand–based company, VHT’s financial
reporting year end is 31 March and all financial reports
will be designated in NZ$.
policy sets out closed periods during which Directors
and employees may not trade.
The policy also requires that Directors and employees
of the Company in possession of price-sensitive
information must not at any time deal in securities of
the Company, or advise or suggest another person do
so, or communicate the price-sensitive information to
a person who may deal in securities of the Company.
The policy prohibits Directors and key management
personnel from engaging in short-term dealing in
securities of the Company.
Key Management Personnel are not permitted to
enter into (directly or indirectly) a margin loan or
other financing arrangement where there is a risk that
Company securities will be traded pursuant to the
terms of the margin loan or financing arrangement
(together a Margin Loan), unless they have obtained
the prior written consent of the Chairman of the
Board to enter into the Margin Loan and disclosed
to the Chairman of the Board all relevant information
regarding the Margin Loan.
9.Diversity Policy
VHT has adopted a diversity policy which sets out
VHT’s commitment to diversity and inclusion in the
workplace. The diversity policy provides a framework
under which the Board, or an appropriate committee of
the Board, will set measurable objectives for achieving
gender diversity targets and will assess annually both
those objectives and VHT’s progress in achieving the
objectives that the Company has set itself.
The initial key focus of the Board on diversity relates
to gender diversity at the Board and senior executive
level, and gender and ethnic diversity among
employees and consultants. Under the diversity policy
VHT recognises other diversity grounds and commits
to not discriminate against individuals on a number of
grounds including race, impairment, parental status,
religious and political beliefs. Under the policy the
Company states that, as a principle, it will not tolerate
discrimination, harassment, vilification or victimisation
in the workplace. The Company intends to report
annually against the measurable objectives that it sets
regarding diversity.
It is expected that financial results for the full year
(for the 12 months ending 31 March) will be reported
in May each year and the half-year financial results
(for the 6 months ending 31 September) will be
reported in November.
8.Securities Trading Policy
VHT has a Securities Trading Policy for Directors and
employees of VHT. The policy requires Directors and
key management personnel to obtain approval prior
to dealing in VHT securities. The policy sets a trading
window of six weeks following the release of annual or
half-yearly results, in which staff members covered by
the policy may trade in VHT securities. In addition, the
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6
10. Departures from ASX recommendations
ASX PRINCIPLES
AND ASX
RECOMMENDATIONS
2.1 The Board
should have
a Nomination
Committee.
SUMMARY OF
POSITION OF VHT
The Board has determined not to establish a Nomination Committee at this time. The
Board considers that such a committee is not necessary and would be burdensome at
this time given the role such a committee would play and the Board’s current size and
composition. The Board considers that it collectively has the appropriate balance of
skills, knowledge, experience, independence and diversity to enable it to discharge its
duties and responsibilities effectively in considering the matters that would otherwise
be considered by this committee.
The Board will keep this matter under review and if deemed desirable or necessary,
may constitute a Nomination Committee at an appropriate time in the future.
2.4 A majority of
the Board should
be independent
Directors.
The Board comprises 6 Directors, of which 5 are Non-Executive Directors. 3 out of 5 of
the Non-Executive Directors are independent.
Roger Allen, the Chairman of the Board, is not considered to be independent by virtue
of his substantial shareholding in the Company, having been the primary seed capital
provider which enabled the VHT technology to be commercialised.
Professor Sir John Michael Brady is similarly not considered to be independent by
virtue of his substantial shareholding for the same reasons.
The Chair of the Audit and Risk Committee is independent, as are 2 other NonExecutive Directors, making 50% of the Board independent.
The Board considers its present composition to be appropriate, though it will monitor
this composition and, if deemed appropriate, recruit another independent NonExecutive Director.
2.5 The Chair of
the Board should
be an independent
Director.
Roger Allen, the Chairman of the Board, is not considered to be independent by virtue
of his substantial shareholding in the Company, having been the primary seed capital
provider which enabled the VHT technology to be commercialised.
8.1 The Board
should have a
Remuneration
Committee.
The Board has determined not to establish a Remuneration Committee at this
time. The Board considers that such a committee is not necessary and would be
burdensome at this time given the role such a committee would play and the Board’s
current size and composition. The Board has an internal process and has used outside
consultants to set the level and composition of remuneration for Directors and senior
executives, to ensure that such remuneration is appropriate and not excessive.
The Board is in the process of formulating a succession plan, with a view to appointing
an independent Chair within two years of listing.
The Board will keep this matter under review and if deemed desirable or necessary,
may constitute a Remuneration Committee at an appropriate time in the future.
70
6.7 Related party transactions
Other than as set out below or elsewhere in this
Prospectus, there are no existing agreements or
arrangements nor any currently proposed transactions
in which the Company was, or is to be, a participant
and in which any related party of the Company has
or will have a direct or indirect material interest in the
Company or the Offer:
• the compensation arrangements with Directors
and executive officers, which are described in
Section 6.5; and
• the indemnification arrangements with Directors
and executive officers which are described in
Section 6.5.4.
Policy for approval of related party transactions
The Company’s Audit and Risk Committee is
responsible for reviewing and approving all
transactions in which the Company is a participant
and in which any parties related to the Company,
including its executive officers, Directors, beneficial
owners of more than 5% of the Shares, immediate
family members of the foregoing persons and any
other persons whom the Board determines may be
considered related parties of the Company, has or will
have a direct or indirect material interest.
The Audit and Risk Committee or its Chairperson, as
the case may be, will only approve those related party
transactions that are determined to be in, or are not
inconsistent with, the best interests of the Company
and its Shareholders, after taking into account all
available facts and circumstances as the Audit and
Risk Committee or the Chairperson determines in
good faith to be necessary. Transactions with related
parties will also be subject to Shareholder approval to
the extent required by the ASX Listing Rules.
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7
72
DE TA IL S OF THE OFFER
7
DETAILS OF THE OFFER
7.1 Description of the Offer
This Prospectus relates to an Offer of 20 million
Shares in VHT at an Offer Price of A$0.50 per share to
raise A$10 million.
The Offer is fully underwritten by the Lead Manager,
Morgans Corporate Limited.
The total number of Shares on issue at completion of
the Offer will be 122,467,502. Shares issued under
the Offer will rank equally in all respects with existing
Shares on issue.
There is no general public offer of Shares –
Applications may only be made under the Broker Firm
Offer (see Section 7.3).
The Offer is made on the terms, and is subject to the
conditions, set out in this Prospectus.
7.2 Institutional Offer
1.Invitations to Bid
The Institutional Offer consists of an invitation to
certain Institutional Investors in Australia and New
Zealand to apply for Shares. The Lead Manager
has separately advised Institutional Investors of the
Application procedures for the Institutional Offer.
Offers and acceptances in the Institutional Offer are
made under this Prospectus and are at the Offer Price
per Share.
2.Institutional Offer Allocation Policy
The allocation of Shares among applicants in the
Institutional Offer was determined by the Lead
Manager in consultation with VHT. The Lead Manager,
in consultation with VHT, has absolute discretion
regarding the basis of allocation of Shares among
other Institutional Investors and there is no assurance
that any such Institutional Investor will be allocated any
Shares, or the number of Shares for which it has bid.
The allocation policy for the invitations referred was
influenced by a number of factors including:
a) number of Shares bid for by particular bidders;
b) the timeliness of the bid by particular bidders;
c) VHT’s desire for an informed and active trading
market following Official Quotation;
d) VHT’s desire to establish a wide spread of
institutional Shareholders;
e) overall level of demand from Brokers under the
Broker Firm Offer and Institutional Offer;
f) the size and type of funds under management
of particular bidders;
g) the likelihood that particular bidders will be
long-term Shareholders; and
h) other factors that VHT and the Lead Manager
considered appropriate.
7.3 Broker Firm Offer
1.Who Can Apply?
The Broker Firm Offer is open to persons who have
received a firm allocation of Shares from their Broker
and who have a registered address in Australia or New
Zealand. If you have been offered a firm allocation
of Shares by a Broker, you will be treated as an
Applicant under the Broker Firm Offer in respect of
that allocation. You should contact your Broker to
determine whether they may allocate Shares to you
under the Broker Firm Offer.
2.How to Apply
Applications for Shares may only be made on a
Broker Firm Offer Application Form attached to or
accompanying this Prospectus or in its electronic
copy form which may be downloaded in its entirety
from www.volparasolutions.com/investors. If you are
an investor applying under the Broker Firm Offer, you
should complete and lodge your Broker Firm Offer
Application Form with the Broker from whom you
received an invitation to participate. Broker Firm Offer
Application Forms must be completed in accordance
with the instructions given to you by your Broker
and the instructions set out on the Broker Firm Offer
Application Form.
By making an Application, you declare that you were
given access to this Prospectus (or any replacement
Prospectus), together with a Broker Firm Offer
Application Form. The Corporations Act prohibits any
person from passing an Application Form to another
person unless it is attached to, or accompanied by,
a hard copy of this Prospectus or the complete and
unaltered electronic version of this Prospectus.
The minimum Application under the Broker Firm
Offer is A$2,000 (equivalent to 4,000 Shares) and in
multiples of A$500 (1,000 Shares) thereafter. There is
no maximum value of Shares that may be applied for
under the Broker Firm Offer. However, the Company
and the Lead Manager reserve the right to aggregate
any Applications which they believe may be multiple
Applications from the same person or reject or scale
back any Applications in the Broker Firm Offer. The
Company may determine a person to be eligible to
participate in the Broker Firm Offer, and may amend
or waive the Broker Firm Offer Application procedures
or requirements, in its discretion in compliance with
applicable laws.
Applicants under the Broker Firm Offer must lodge
their Broker Firm Offer Application Form and
Application Payment with the relevant Broker in
accordance with the relevant Broker’s directions in
order to receive their firm allocation. Applicants under
the Broker Firm Offer must not send their Broker Firm
Offer Application Forms to the Share Registry.
The Broker Firm Offer is expected to open on Monday
4th April 2016 and is expected to close on Friday 15th
April 2016. The Company and the Lead Manager may
elect to extend the Offer or any part of it, or accept
late Applications either generally or in particular
cases. The Offer, or any part of it, may be closed
at any earlier date and time, without further notice.
Your Broker may also impose an earlier closing date.
Applicants are therefore encouraged to submit their
Applications as early as possible. Please contact your
Broker for instructions.
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7
3.How to Pay
Applicants under the Broker Firm Offer must pay their
Application Payments in accordance with instructions
received from their Broker. Application Payments will
be held on trust for Applicants until the issue of Shares
to successful Applicants. Application Payments will be
refunded if the Offer is withdrawn and/or cancelled, or
ASX does not grant permission for Official Quotation
within three months after the Prospectus Date. No
interest will be payable on refunded amounts.
4.Application monies
The Company reserves the right to decline any
Application in whole or in part, without giving any
reason. Applicants under the Broker Firm Offer whose
Applications are not accepted, or who are allocated a
lesser number of Shares than the amount applied for,
will receive a refund of all or part of their Application
Payments, as applicable. Interest will not be paid on
any monies refunded.
Applicants whose Applications are accepted in full
will receive the whole number of Shares calculated
by dividing the Application amount by the Offer Price.
Where the Offer Price does not divide evenly into
the Application amount, the number of Shares to be
allocated will be determined by the Applicant’s Broker.
Your Application Payment should be for the entire
Application amount.
Cheque(s) or bank draft(s) must be in Australian
Dollars and drawn on an Australian branch of an
Australian bank, must be crossed “Not Negotiable”
and must be made payable in accordance with the
directions of the Broker from whom the Applicant
received a firm allocation.
Applicants should ensure that sufficient funds are
held in the relevant account(s) to cover the amount of
the cheque(s) or bank draft(s). If the amount of your
cheque(s) or bank draft(s) for Application Payments (or
the amount for which those cheque(s) or bank draft(s)
clear in time for allocation) is less than the amount
specified on your Broker Firm Offer Application Form,
you may be taken to have applied for such lower
dollar amount of Shares as for which your cleared
Application Payments will pay (and to have specified
that amount on your Broker Firm Offer Application
Form) or your Application may be rejected.
5.Acceptance of Applications
An Application in the Broker Firm Offer is an offer by
an Applicant to the Company to subscribe for Shares
in the amount specified on the Broker Firm Offer
Application Form at the Offer Price on the terms and
conditions set out in this Prospectus (including any
supplementary or replacement prospectus) and the
Broker Firm Offer Application Form. To the extent
permitted by law, an Application by an Applicant under
the Offer is irrevocable.
An Application may be accepted by the Company and
the Lead Manager in respect of the full number of
Shares specified in the Broker Firm Offer Application
74
Form or any of them, without further notice to the
Applicant. Acceptance of an Application will give rise
to a binding contract.
6.Broker Firm Offer Allocation Policy
The apportionment of Shares to Brokers for allocation
to Institutional Investors and retail clients will be
determined by the Lead Manager, in consultation with
the Company.
Shares which have been allocated to Brokers for
allocation to their Australian or New Zealand resident
retail clients will be issued to the Applicants who
have received a valid allocation of Shares from those
Brokers. It will be a matter for those Brokers as to
how they chose to allocate Shares among their retail
clients, and they (and not the Company or the Lead
Manager) will be responsible for ensuring that retail
clients who have received an allocation from them,
receive the relevant Shares.
7.4 Underwriting arrangements
The Offer is fully underwritten. The Lead Manager
and VHT have entered into an underwriting agreement
under which the Lead Manager has been appointed as
arranger, manager and underwriter to the Offer. The
Lead Manager agrees, subject to certain conditions
and termination events, to underwrite Applications
for all Shares under the Offer. The underwriting
agreement sets out a number of circumstances under
which the Lead Manager may terminate the agreement
and the underwriting obligations. A summary of
certain terms of the agreement and underwriting
arrangements, including the termination provisions, is
provided in Section 10.8.3.
7.5 Shareholding on completion of the Offer
On completion of the Offer the number of Shares on issue will be 122,467,502 ordinary shares and all Shares
will rank equally in all respects.
Details of the Shares on issue before the Offer and at the completion of the Offer are set out below, including
details of the expected substantial Shareholders at the completion of the Offer:
PRE COMPLETION OF OFFER
POST COMPLETION OF OFFER
Shares
%
Shares
%
Patagorang Pty Ltd, Investor*
20,467,848
20%
20,467,848
17%
Ralph Highnam, VHT Director
and CEO
15,632,298
15%
15,632,298
13%
Tina Jennings, Investor
10,832,892
11%
10,832,892
9%
7,919,211
8%
7,919,211
6%
47,615,253
46%
47,615,253
39%
0%
20,000,000
16%
100%
122,467,502
100%
Michael Brady, VHT Director
Other Shareholders
New Investors under the Offer
102,467,502
*Roger Allen, VHT Director, is the controller of Patagorang Pty Ltd.
Note: The interests set out above do not take into account any subscriptions made by existing Shareholders as
part of the Offer.
7.6 Escrow arrangements
Certain founders and the VHT Directors have agreed with ASX not to dispose of, create any security interest in
or transfer effective ownership or control of the Shares or Options that they currently hold (directly or indirectly)
amounting to 51.7 million Shares for a period of 24 months from Official Quotation.
In addition, the ASX has deemed that the 11.8 million Shares issued to CPS holders in satisfaction of the QDE
should be held in escrow for 12 months from the date of conversion of the CPS.
A further 33.7 million Shares are subject to voluntary escrow for a period of 12 months from the date of
Official Quotation.
Each Shareholder subject to voluntary escrow has entered or is expected to enter into an escrow deed in respect
of their escrowed Shares, which prevents them from disposing of their respective escrowed Shares until 12 months
from the date of Official Quotation. The restriction on “disposing” is broadly defined and includes, among other
things, selling, assigning, transferring or otherwise disposing of any interest in the Shares, encumbering or granting
a security interest over the Shares, doing, or omitting to do, any act if the act or omission would have the effect of
transferring effective ownership or control of any of the Shares or agreeing to do any of those things.
Details of the number of Shares to be held in escrow under the ASX Restriction Agreements and the voluntary
escrow deeds are as follows:
ESCROW FOR
12 MONTHS
ESCROW FOR
24 MONTHS
TOTAL ESCROW
SHARES
% OF
ISSUED CAPITAL
-
51,756,903
51,756,903
42%
Other Shareholders
11,864,514
253,011
12,117,525
10%
Voluntary Escrow
33,691,878
-
33,691,878
28%
45,556,392
52,009,914
97,566,306
80%
Directors and
Management
75
7
With respect to the voluntarily escrowed Shareholders,
they may be released early from these escrow
obligations in certain circumstances including:
• to enable the Shareholder to accept an offer
under a takeover bid in relation to its Shares if at
least half of the holders of the Shares which are
the subject of the bid have accepted the takeover
bid and the bid becomes unconditional;
• to enable the Shares held by the Shareholder to
be transferred or cancelled as part of a merger
by way of any arrangement or amalgamation in
relation to the Shares under Part 13 or Part 15 of
the Companies Act;
• in the case of a corporate holder, to allow a
corporate restructure or reorganisation to occur,
or to allow a transfer to a related entity, provided
the transferee of the escrowed Shares executes
a voluntary escrow deed in similar form for the
remainder of the escrow period;
• in the case of an individual, to allow a transfer on
the death, serious disability or incapacity of the
Shareholder; and
• to allow the Shareholder to deal in the Shares to
the extent the dealing is required by applicable
law (including an order of a court of competent
jurisdiction).
7.7 Discretion regarding the Offer
VHT may withdraw the Offer at any time before the
issue of Shares to successful Applicants under the
Broker Firm Offer and Institutional Offer. If the Offer, or
any part of it, does not proceed, all relevant Application
Payments will be refunded (without interest).
VHT and the Lead Manager also reserve the right to
extend the Offer or any part of it, accept late Applications
or bids either generally or in particular cases, reject any
Application or bid, or allocate to any Applicant fewer
Shares than the amount applied or bid for.
7.8 ASX Listing
VHT will apply within seven days of the Prospectus
Date for admission to the Official List and Official
Quotation. VHT’s ASX code is expected to be VHT.
ASX takes no responsibility for this Prospectus or the
investment to which it relates. The fact that ASX may
admit VHT to the Official List is not to be taken as an
indication of the merits of VHT or the Shares offered
for subscription.
If permission is not granted for Official Quotation
within three months of the Prospectus Date (or any
later date permitted by law), all Application Payments
received by VHT will be refunded without interest
as soon as practicable in accordance with the
requirements of the Corporations Act.
On admission to the Official List VHT will be required
to comply with the ASX Listing Rules, subject to any
waivers obtained by VHT from time to time.
7.9 CHESS and issued sponsored holdings
The Company will apply to participate in the clearing
system known as CHESS and operated by ASX
76
Settlement, a wholly owned subsidiary of ASX, in
accordance with the ASX Listing Rules and ASX
Settlement Operation Rules. On admission to CHESS,
the Company will operate an electronic issuersponsored sub-register and an electronic CHESS
sub-register. The two sub-registers together will make
up the Company’s principal register of securities.
Under CHESS, the Company will not issue share
certificates to successful Applicants following
allotment. Instead, the Company will provide each
Shareholder whose address is in Australia or New
Zealand with a holding statement which sets out the
number of Shares allotted to the Shareholder under
this Prospectus. Holding statements are expected
to be sent to successful Applicants on or around 21
April 2016. If applicable, the holding statement will
also advise Shareholders of their Holder Identification
Number (HIN) and Sponsored Issuer Number
(SRN). If a shareholding changes during a month,
the Shareholder will receive a revised statement at
the end of that month. Shareholders will receive a
statement at the end of that month. Shareholders may
also request statements at any other time (although
the Company may charge an administration fee).
It is the responsibility of Applicants to determine their
allocation prior to the trading of Shares. Applicants
who sell their Shares before they receive notice of
their allocation do so at their own risk.
7.10 Potential effect of the fundraising on the
future of the Company
The Directors believe that on Completion, the
Company will have sufficient funds available from
the cash proceeds of the Offer, and its operations,
to fulfil the purposes of the Offer and meet its stated
business objectives.
7.11 Restrictions on distribution
No action has been taken to register or qualify this
Prospectus, the Shares or the Offer or otherwise
to permit a public offering of the Shares in any
jurisdiction outside Australia and New Zealand. If
you are an investor in a jurisdiction outside Australia
and New Zealand, you should read Section 10.15 and
confirm you comply with the Offer restrictions relating
to your jurisdiction.
This Prospectus does not constitute an offer or
invitation to subscribe for Shares in any jurisdiction
in which, or to any person to whom, it would not be
lawful to make such an offer or invitation or issue
under this Prospectus.
This Prospectus may not be released or distributed
in the United States, and may only be distributed to
persons to whom the Offer may lawfully be made in
accordance with the laws of any applicable jurisdiction.
This document does not constitute an offer to sell,
or a solicitation of an offer to buy, securities in the
United States. The Shares have not been, and will
not be, registered under the U.S. Securities Act or the
securities laws of any state of the United States and
may not be offered or sold, directly or indirectly, in the
United States except in accordance with an exemption
from, or in a transaction not subject to, the registration
requirements of the U.S. Securities Act and any other
applicable securities laws.
Each Applicant in the Broker Firm Offer, and each
person to whom the Institutional Offer is made under
this Prospectus, will be taken to have represented,
warranted and agreed to VHT and the Lead Manager
as follows:
1) U.S. Securities Act or the securities law
of any state of the United States and may
not be offered, sold or resold in the United
States, except in a transaction exempt from,
or not subject to, registration under the U.S.
Securities Act and any other applicable
securities laws;
2) it is not in the United States;
3) it has not and will not send the Prospectus or
any other material relating to the Offer to any
person in the United States; and
4) it will not offer or sell the Shares in the
United States or in any other jurisdiction
outside Australia and New Zealand except in
transactions exempt from, or not subject to,
registration under the U.S. Securities Act and
in compliance with all applicable laws in the
jurisdiction in which Shares are offered and sold.
Authority, Wellington, New Zealand. The Australian
and New Zealand regulators will work together to
settle your complaint.
The taxation treatment of Australian securities is not
the same as for New Zealand securities.
The offer may involve a currency exchange risk.
The currency for the securities is not New Zealand
dollars. The value of the securities will go up or down
according to changes in the exchange rate between
that currency and New Zealand dollars. These
changes may be significant.
If you expect the securities to pay any amounts in a
currency that is not New Zealand dollars, you may
incur significant fees in having the funds credited to a
bank account in New Zealand in New Zealand dollars.
If the securities are able to be traded on a securities
market and you wish to trade the securities through
that market, you will have to make arrangements for a
participant in that market to sell the securities on your
behalf. If the securities market does not operate in
New Zealand, the way in which the market operates,
the regulation of participants in that market and the
information available to you about the securities and
trading may differ from securities markets that operate
in New Zealand.
Please speak with your Broker if you have any
questions in relation to this.
Each Applicant under the Institutional Offer will be
required to make certain additional representations,
warranties and covenants set out in the confirmation of
allocation letter distributed to it.
7.12 New Zealand investors
This offer to New Zealand investors is a regulated
offer made under Australian and New Zealand law.
In Australia, this is Chapter 8 of the Corporations Act
2001 and Regulations. In New Zealand, this is Part 5
of the Securities Act 1978 and the Securities (Mutual
Recognition of Securities Offerings – Australia)
Regulations 2008.
This offer and the content of the offer document are
principally governed by Australian rather than New
Zealand law. In the main, the Corporations Act 2001
and Regulations (Australia) set out how the offer must
be made.
There are differences in how securities are regulated
under Australian law. For example, the disclosure of
fees for collective investment schemes is different
under the Australian regime. The rights, remedies, and
compensation arrangements available to New Zealand
investors in Australian securities may differ from the
rights, remedies, and compensation arrangements for
New Zealand securities.
Both the Australian and New Zealand securities
regulators have enforcement responsibilities in
relation to this offer. If you need to make a complaint
about this offer, please contact the Financial Markets
77
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78
INVE S TIG ATING
ACCOUNTA NT ’ S REP ORT
8
INVESTIGATING ACCOUNTANT’S REPORT
79
8
80
81
8
82
83
8
84
9
IP A ND PATENT REP ORT
85
9
IP AND PATENT REPORT
23 March 2016
86
87
9
88
89
9
90
91
9
92
93
9
94
95
9
96
97
9
98
99
9
100
101
9
102
103
9
104
105
9
106
10
A DDITION A L INFORM ATION
107
10
ADDITIONAL INFORMATION
10.1 Registration
10.4 Current capital structure
The Company was incorporated on 24 February
2009 and is registered in New Zealand, company
number 2206998. The Company was registered as an
Australian registered body with ARBN 609 946 867 on
20 January 2016.
The issued capital of the Company at the Prospectus
Date is set out in the table below:
10.2 Company tax status and accounting standards
The Company is a tax resident of New Zealand and
not a tax resident of Australia. The proposed Official
Quotation in itself does not have a direct effect on the
tax residency of the Company.
The financial statements of the Company will be
prepared in accordance with NZ GAAP. They
comply with NZ IFRS, and other applicable Financial
Reporting Standards as appropriate for profit-oriented
entities. The financial statements of the Company
will be made up to 31 March annually. The financial
statements of the Company will continue to be
audited in accordance with International Standards on
Auditing and International Standards on Auditing (New
Zealand).
NOTES
SHARES
Ordinary Shares
1
30,056,265
CPS
2
52,474,335
CPS QDE Shares
3
19,936,902
Total Issued Capital
Legacy and ESOP
Options
Total Diluted Share
Capital
102,467,502
4
15,951,738
118,419,240
Notes:
1.
On 25 February 2016, the Directors resolved to
reconstruct the capital of the Company by way of
a 3:1 share split with the effect that all ordinary
and CPS holders hold 3 times the number of
shares they held previously as at that date.
2.
The CPS on issue are convertible into ordinary
shares on a 1:1 basis immediately prior to the
quotation of the Shares on ASX.
3.
Convertible Preference Shareholders are entitled
to a QDE calculated on the amount invested,
multiplied by 8% per annum (compounding
monthly), to be settled through the issue of
additional ordinary shares, which has been
calculated as at 31 March 2016.
4.
The Company has two employee and executive
incentive plans in operation, being the Legacy
ESOP and the New ESOP, details of which are
set out in Section 4 and in Section 10.7.
10.3 Corporate structure
10.5 Applicable law
VHT and Volpara Solutions Limited are both
companies registered in New Zealand.
Volpara Solutions Inc. is a company registered under
the laws of the State of Delaware in the US.
Matakina UK Limited is a company registered under
the laws of England and Wales.
1.The Company is a New Zealand company
The Company is a company incorporated in New
Zealand and is principally governed by New Zealand
law, rather than Australian law. In Australia, the
Company is registered with ASIC as an Australian
registered body. As the Company is not established in
Australia, its general corporate activities (apart from any
offering of securities in Australia and certain reporting
obligations) are not regulated by the Corporations Act
or by ASIC but instead are regulated in New Zealand
by New Zealand law including the Companies Act,
Securities Act, Securities Regulations, Financial Markets
Conduct Act, Financial Markets Conduct Regulations,
and by the New Zealand Financial Markets Authority and
Registrar of Companies.
Set out below is information summarising key features
of the laws that apply to the Company as a New
Zealand company (under New Zealand law, including
as modified by exemptions or waivers) compared
108
with the laws that apply to Australian publically listed
companies generally. It is important to note that this
summary does not purport to be a complete review
of all matters of New Zealand law applicable to the
Company or all matters of Australian law applicable to
Australian publically listed companies or to highlight
all provisions that may differ from the equivalent
provisions in Australia.
Unless otherwise stated, the Corporations Act provisions
do not apply to the Company as a foreign company.
2.Concise summary of rights and obligations of
security holders, and substantial holdings and
takeovers, under New Zealand law.
Transactions requiring shareholder approval
The principal transactions or actions requiring
shareholder approval under the Companies Act
include the following: altering the Constitution of the
company, appointing or removing a director or auditor,
“major transactions”, amalgamations, putting the
company into liquidation and changes to the rights
attached to Shares. These are broadly comparable
to the transactions for which shareholder approval is
required under the Corporations Act. However, the
Corporations Act also requires shareholder approval
for certain transactions affecting share capital (e.g.
share buybacks and share capital reductions) and
there is no shareholder approval requirement for
“major transactions” under the Corporations Act
(although certain related party transactions require
shareholder approval).
Shareholders’ right to request a meeting
The rights of shareholders to request a meeting under
the Companies Act (shareholders holding shares
carrying at least 5% of the voting rights may make
such a request) are comparable to such rights under
the Corporations Act. The Corporations Act also
provides that shareholders with at least 5% of the
votes that may be cast at the general meeting may
also call and arrange to hold a general meeting at their
own expense.
Appointment of proxies
Shareholders have the right to appoint a proxy to
attend and vote at meetings on their behalf under the
Companies Act and the Corporations Act.
Changing rights attaching to Shares
The Companies Act provides that a company must not
take action that affects the rights attached to shares
unless that action has been approved by a special
resolution of each affected interest group. (An “interest
group” in relation to an action or proposal affecting
the rights attached to shares means a group of
shareholders whose affected rights are identical and
whose rights are affected by the action or proposal in
the same way and who comprise the holders of one
or more classes of shares in the company). Under the
Corporations Act, if a company’s constitution does not
set out a procedure for varying or cancelling rights
attached to shares in a certain asset class, such rights
may only be varied or cancelled by special resolution
of the members of that class or with written consent of
members with at least 75% of the votes in that class.
Relief from oppressive conduct
Under the Companies Act, a shareholder or
former shareholder of a company (or any other
entitled person) who considers that the affairs of a
company have been (or are being, or are likely to
be) oppressive, unfairly discriminatory, or unfairly
prejudicial to him or her, in any capacity, may apply to
the court for relief. The court may, if it thinks it is just
and equitable to do so, make such orders as it thinks
fit. Shareholders also have statutory remedies under
the Corporations Act for oppressive or unfair conduct
of the company’s affairs and the court can make any
order as it sees appropriate.
Legal proceedings on behalf of the Company
Under the Companies Act, a court may, on application of
a shareholder or director of a company, grant leave to that
shareholder or director to bring proceedings in the name
and on behalf of the company or any related company,
or intervene in proceedings to which the company or any
related company is a party, for the purpose of continuing,
defending or discontinuing the proceedings on behalf of
the company or related company.
Leave may only be granted if the court is satisfied
that either the company or related company does
not intend to bring, diligently continue or defend, or
discontinue the proceedings, or it is in the interests of
the company or related company that the conduct of
the proceedings should not be left to the directors or to
the determination of the shareholders as a whole. No
proceedings brought by a shareholder or director or in
which a shareholder or director intervenes with leave
of the court (as described above) may be settled or
compromised or discontinued without the approval of
the court.
The position is broadly comparable under the
Corporations Act.
“Two strikes” equivalent
There is no equivalent of a “two strikes” rule in relation
to remuneration reports in New Zealand. New Zealand
companies are not required to publish remuneration
reports so shareholders necessarily cannot vote
on them. There is, however, an obligation to state
in the company’s annual report, in respect of each
director or former director of the company, the total
of the remuneration and the value of other benefits
received by that director or former director from the
company during the relevant accounting period and,
in respect of employees or former employees of the
company who received remuneration and any other
benefits in their capacity as employees during the
relevant accounting period, the value of which was or
exceeded NZ$100,000 per annum, the number of such
employees, stated in bands of NZ$10,000.
Takeovers and substantial holdings
The New Zealand position under the Takeovers Code
(as set out in the Takeovers Code Approval Order
2000) and New Zealand Financial Markets Conduct Act
2013 is broadly comparable to the Australian position
in relation to the regulation of takeovers. A 20%
threshold applies (under which a person is prevented
from increasing the percentage of voting rights held
109
10
or controlled by them in excess of that threshold or
from becoming the holder or controller of an increased
percentage of voting rights if they already hold or
control more than 20% of the voting rights), subject to
certain “compliance options” (including full and partial
offers, 5% creep over 12 months in the 50% to 90%
range, and acquisitions with shareholder approval).
Compulsory acquisitions are permitted by persons
who hold or control 90% or more of voting rights in a
company. Under New Zealand law and Australian law,
there is no requirement for a Shareholder to issue
a substantial holding notice of holdings above 5%.
However, a Shareholder may voluntarily disclose such
information if it chooses to do so.
Note: where it is noted that New Zealand law contains comparable
provisions to those existing under Australian law, and vice versa, it
is emphasised that the summar y only attempts to provide general
guidance, and the detailed provisions may contain dif ferences and
may also be subject to dif fering interpretation by Australian and
New Zealand cour ts.
10.6 Capital structure following the Offer
The issued capital of the Company as at the Allotment
Date will comprise only ordinary shares and unquoted
options over Shares and will be as follows:
POST COMPLETION
OF OFFER
DILUTED
Ordinary
Shares
%
%
Directors and
Management
52,272,372
43%
38%
Other
Shareholders
50,195,130
41%
36%
20,000,000
16%
14%
122,467,502
100%
88%
New Investors
under the Offer
Legacy and New
ESOP Options
Total Diluted
Share Capital
15,951,738
12%
138,419,240
100%
Rights and liabilities attaching to Shares
Immediately after issue and allotment, the Shares will
be fully paid Shares and the Shares will rank paripassu with the Shares currently on issue.
The rights and liabilities attaching to the ownership
of the Shares arise from a combination of the
Constitution, statute, the ASX Listing Rules and
general law.
A summary of the significant rights, liabilities and
obligations attaching to the Shares and a description
of other material provisions of the Constitution are set
out below. This summary is not exhaustive nor does
it constitute a definitive statement of the rights and
liabilities of Shareholders. The summary assumes that
the Company is admitted to the Official List.
110
1.Voting at a general meeting
At a general meeting of the Company, every
Shareholder present in person or by proxy,
representative or attorney has one vote on a show of
hands and, on a poll, one vote for each Share held.
On a poll, every member (or his or her proxy, attorney
or representative) is entitled to vote for each Share held.
2.Meetings of members
Each Shareholder is entitled to receive notice of, attend
and vote at, general meetings of the Company and
to receive all notices, accounts and other documents
required to be sent to Shareholders under the
Constitution, the Companies Act and the Listing Rules.
3.Dividends
Currently the Company does not pay dividends. The
Board may from time to time resolve to pay dividends
to Shareholders and fix the amount of the dividend, the
time for determining entitlements to the dividend and
the timing and method of payment.
4.Transfer of Shares
Subject to the Constitution, Shares may be transferred
by a proper transfer effected in accordance with the
Listing Rules or the ASX Settlement Operating Rules,
by a written instrument of transfer which complies
with the Constitution or, subject to compliance with
the Listing Rules and the ASX Settlement Operating
Rules, by any other form approved by the Directors.
The Board may refuse to register a transfer of Shares
where permitted to do so under the Companies
Act, the ASX Listing Rules or the ASX Settlement
Operating Rules. The Board must refuse to register a
transfer of Shares when required to by the Companies
Act, the ASX Listing Rules or the ASX Settlement
Operating Rules.
5.Issue of further Shares
Subject to the Companies Act, the Listing Rules, and
the Constitution, the Directors may issue and allot, or
dispose, of Shares on terms determined from time to
time by the Directors at an offer price that the Directors
determine from time to time. The Directors’ power
under the Constitution includes the power to grant
options and performance rights over unissued Shares.
6.Winding up
Without prejudice to the rights of the holders of
Shares issued on special terms and conditions, if the
Company is wound up, the liquidator may, with the
sanction of an ordinary resolution of the Company,
divide among the Shareholders in kind all or any of the
Company’s assets; and for that purpose, determine
how it will carry out the division between the different
classes of Shareholders, but the liquidator may not
require a Shareholder to accept any Shares or other
securities in respect of which there is any liability.
7.Non-marketable parcels
The Company may sell the Shares of a Shareholder
who holds less than a marketable parcel of Shares.
8.Share buy-backs
subsidiaries because of a material breach of the
Legacy Participant’s employment agreement, retainer,
consulting or services agreement, restraint of trade,
or under any law during the option exercise period the
Company may:
Subject to the Companies Act and the ASX Listing
Rules, the Company may buy Shares on terms and at
times determined by the Board.
a) terminate all options granted and not exercised;
9.Variation of class rights
c) repurchase the Shares that have been issued to
the Legacy Participant pursuant to the exercise
of options at the lower of the option exercise
price or the market value; and
At present, the Company’s only class of Shares on
issue is ordinary shares. The rights attached to any
class of Shares may be varied in accordance with the
Companies Act.
10.Amendment
The Constitution may be amended only by special
resolution passed by at least three-quarters of the
Shareholders entitled to vote and who do vote (in
person or by proxy) on the resolution at a general
meeting of the Company. The Company must give at
least 10 business days’ written notice of a general
meeting of the Company.
10.7 Employee and executive incentive plans
The Company has two employee and executive incentive
plans in operation: the Legacy ESOP and the New
ESOP. The plans are both option plans. The Company
enters into an option deed directly with each grantee of
options. None of the options issued under the Legacy
ESOP or the New ESOP will be Officially Quoted.
Legacy ESOP
The Company has issued a total of 10,626,738 options
under the Legacy ESOP. No further options will be
issued under the Legacy ESOP.
The following is a summary of the rights and liabilities
attaching to the options on issue under the Legacy ESOP.
1.Offer
The Company may grant options to an existing
employee of the Company, or a person who has
a service relationship or service contract with
the Company or any of its subsidiaries (Legacy
Participant). An offer will specify the number of
Options to be granted to the Legacy Participant, the
vesting period and the exercise price.
2.Exercise
A Legacy Participant must give 10 working days’
written notice to the Company stating the whole
number of vested options to be exercised and provide
payment in full within 20 working days of the date on
which notice was given.
If at the time of the exercising of vested options the
Legacy Participant is not already a Shareholder, the
Legacy Participant must execute and deliver to the
Company a deed of accession.
3.Termination and Lapse
If a Legacy Participant ceases to be employed
by or as a consultant with the Company or its
b) cancel all other benefits the Legacy Participant
is enticed to receive;
d) require the Legacy Participant to pay to the
Company the proceeds from any sale of Shares
issued to the Legacy Participant.
If the Legacy Participant ceases to be employed by or
as a consultant with the Company or its subsidiaries
during the option exercise period because of death
or disability, then the personal representatives will
be entitled to exercise all options held by that Legacy
Participant that had vested at the time the Legacy
Participant ceased to be employed by or a consultant
with the Company.
4.Reorganisation of capital
If, at any time after the issue of options:
a) the Shares are consolidated, the number of
options immediately prior to such consolidation
are consolidated in the same ratio as the
ordinary capital of the Company and the option
exercise price will be amended in inverse
proportion to that ratio;
b) the Shares are subdivided, the number of options
must be subdivided in the same ratio as the
exercise price will be amended to that ratio;
c) the Company reduces the share capital by a
pro rata return to holders of part of the share
capital in respect of each Share, the number
of options shall remain the same but the option
exercise price will be reduced by the same
amount of share capital returned in respect of
each Share;
d) the Company reduces its paid up share capital
by a cancellation of capital that is either lost or
not represented by available assets where no
securities are cancelled, the number of options
and the option exercise price in respect to such
options will remain unchanged;
e) the Company cancels it capital proportionately,
the number of options must be reduced in
the same ratio as the ordinary capital and
option exercise price for such options must be
amended in inverse proportion to that ratio; and
f) there is any other reorganisation or change to the
capital of the Company, the number of options, the
option exercise price, or both, must be reorganised
so the holder of Shares will not receive a benefit
that holders of options do not receive.
111
10
If, after the issue of the options, there is a pro rata issue of
Shares to all holders of Shares for which no consideration
is payable, then the number of options shall be increased
by the same proportion as if the options were Shares.
5.No transfer or dealing with interests
then vested); and cancel all other benefits the New
Participant may be entitled to receive under this deed.
4.Reorganisation of capital
Subject to the ASX Listing Rules, if, at any time after
the issue of options:
An option is not transferable without the Company’s
approval.
a) the Shares are consolidated, the numbers of
options immediate prior to such consolidation
are consolidated in the same ratio as the
exercise price will be amended in inverse
proportion to that ratio;
6.Change of Control
If:
a) the Company resolves to merge with any
other company whereby Shareholders of the
Company would hold less than 50% of the
voting rights of the merged company;
b) the Shares are subdivided, the number of options
must be subdivided in the same ratio as the
exercise price will be amended to that ratio;
b) the Shareholders of the Company approve the
disposition of assets which comprise more than
50% of the assets to a third party not controlled
by the Company; or
c) the Company reduces the share capital by a pro
rata return to holders of part of the share capital
in respect of each Share, the number of options
shall remain the same but the option exercise
price will be reduced by the same amount of
share capital returned in respect of each Share;
c) there is a change in the management of the
Company as a result of the acquisition by any
party not previously a Shareholder of more than
50% of the Shares;
d) the Company reduces its paid up share capital
by a cancellation of capital that is either lost or
not represented by available assets where no
securities are cancelled, the number of options
and the option exercise price in respect to such
options will remain unchanged;
then all vested options must be exercised on or before
30 days from the date that one of the events occur.
New ESOP
The Company has issued a total of 5,325,000 options
under the New ESOP. The following is a summary of
the rights and liabilities attaching to the options on
issue under the New ESOP.
e) the Company cancels it capital proportionately,
the number of options must be reduced in
the same ratio as the ordinary capital and
option exercise price for such options must be
amended in inverse proportion to that ratio; and
1.Offer
The Company may grant options to any employee of
the Company, or a person who is a consultant with the
Company or any of its subsidiaries for nil consideration
(New Participant). An offer will specify the number
of options to be granted to the New Participant, the
vesting period, and the exercise price.
2.Exercise
A New Participant must give 10 working day’s written
notice to the Company stating the whole number of
vested options to be exercised and payment in full, of
the exercise price within 20 working days of the date
on which the notice was given.
If the Company considers that the exercise would give
rise to a breach of the Company’s Constitution, the
listing and/or other rules of any stock exchange on
which the Shares of the Company are quoted; or any
statute or regulation then such exercise will not be valid.
3.Termination and Lapse
If a New Participant ceases to be employed by or a
as a consultant with the Company or its subsidiaries
due to a material breach of the New Participant’s
employment agreement, retainer, consulting or
services agreement, restraint of trade, or under and
law, then the Company may: terminate all options
previously granted to the New Participant and not
exercised by the New Participant (whether or not
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f) there is any other reorganisation or change to the
capital of the Company, the number of options, the
option exercise price, or both, must be reorganised
so the holder of Shares will not receive a benefit
that holders of options do not receive.
Subject to the ASX Listing Rules, if, after the issue
of the options, there is a pro rata issue of Shares to
all holders of Shares for which no consideration is
payable, then the number of options shall be increased
by the same proportion as if the options were Shares.
The ASX Listing Rules may require the Board to make
further adjustments to the terms of the options, in
addition to, or instead of, those listed above in the
event of any reconstruction or reorganisation of capital
affecting the Shares.
5.No transfer or dealing with interests
An option is not transferable without the Company’s
approval.
6.Change of control
If:
a) the Board and Shareholders recommend a
takeover bid or approve a scheme of arrangement
of the Company where such transaction will not
result in the Shareholders holding more than 25%
of the voting rights of the Company;
b) VHT resolves to amalgamate with any other
company where such amalgamation will not result
in the Shareholders holding more than 25% of the
voting rights of the amalgamated company;
c) the Shareholders approve the disposition of
assets comprising more than 75% of the value
of VHT’s assets to an entity not controlled by,
controlling or under common control with VHT or
to an entity in which Shareholders do not hold at
least 25% of that entity’s voting rights; or
d) a change in the management or control of
VHT occurs as a result of the acquisition by
any party of more than 75% of the total issued
Shares carrying voting rights in VHT;
then all vested options must be exercised on or before
30 days from the date that one of these events occur.
Guidelines for New ESOP
The Board has adopted a series of guidelines
(Guidelines) in connection with the implementation
of the New ESOP that will complement individual
option deeds to be entered into between VHT and
each New Participant. The grant of options and
management of the New ESOP will remain at the
absolute discretion of the Board. The Guidelines are
intended to set out some principles and parameters
with respect to the Board’s use of its discretion and to
assist the Board with management of the New ESOP.
It is acknowledged that while it is the Board’s current
intention to implement the New ESOP in accordance
with the Guidelines, there may be instances where
the Board, on a case-by-case basis, feels there is a
need to grant options under the New ESOP outside
one or more of the Guidelines. In that circumstance,
the Board will consider whether the Guidelines should
be permanently amended or waived and whether
disclosure of any such amendment or waiver is
required to be given to VHT Shareholders.
Material matters dealt with under the Guidelines
include:
• the purpose of the issue of options to enable
contributors to the potential success of VHT to
share in that success by giving them options to
purchase Shares at an exercise price during a set
exercise period;
• setting a limit on the issue of options under the
New ESOP which when exercised, represent
up to approximately 5% of the share capital of
VHT on a fully diluted basis. This limit may be
reviewed by the Board from time to time, and if
considered appropriate based on the purpose of
the options, increased. Notice of any increase in
the limit will be given to Shareholders;
• ensuring that, when granting any options under
the New ESOP, the Board must be satisfied
that, at the time of issue of any options, the
exercise price is fair and reasonable to VHT
and its Shareholders (as per section 49 of the
Companies Act 1993); and
• setting a maximum exercise period of seven
years for each tranche of options.
10.8 Material contracts
1.GE Healthcare Software Licence and Distribution
Agreement
Volpara Solutions Limited (VSL), the Company’s
wholly owned subsidiary, has entered into a Software
Licence and Distribution Agreement (Distribution
Agreement) with the General Electric Company,
through and on behalf of its GE Healthcare division
(GEHC).
The Distribution Agreement outlines the terms on
which GEHC has agreed to resell licences to use
the Volpara software on the terms of VSL’s end user
license agreement (Licences) and installation and
training services in connection with those Licences
(Services) in certain territories (primarily the EU,
Canada, the USA, NZ, India, Singapore and Hong
Kong).
The initial term of the Distribution Agreement will
expire on 26 November 2017. After that date, the
Distribution Agreement automatically renews for
1-year periods unless one party elects not to renew
the agreement.
GEHC may terminate the Distribution Agreement at
any time if certain events occur, including:
• if VSL is in default of any of the material
provisions of the Distribution Agreement and that
default is either incapable of remedy or is not
remedied within 30 days after being given notice
to do so by GEHC;
• if VSL is in default of any of the material
provisions of the protected health information
agreement (PHI Agreement) entered into by VSL
and GEHC in connection with the Distribution
Agreement (discussed below);
• if certain insolvency events occur with respect to
VSL; and
• if a force majeure event occurs with respect to
VSL that (i) lasts more than 30 days; or (ii) VSL is
unable to assure GEHC will not result in a delay
lasting more than 30 days.
There is no minimum purchase guarantee or obligation
on GEHC under the Distribution Agreement.
The Distribution Agreement is non-exclusive. GEHC
may develop, market and sell GEHC products that
compete with the Volpara software. VSL may supply
any of its software or services to third parties.
The Distribution Agreement includes escrow provisions,
in connection with which VSL has deposited a copy of the
source code for the Volpara software with Iron Mountain
Intellectual Property Management Inc. (Iron Mountain).
Iron Mountain must hold that source code in escrow on
the terms of an escrow agreement VSL has entered into
with GEHC and Iron Mountain (Escrow Agreement).
Under the Escrow Agreement, Iron Mountain may
release that source code to GEHC if VSL (i) is subject
to an insolvency event; and (ii) has ceased to comply
with VSL’s obligations to provide maintenance and error
correction in respect of the Volpara software. Restrictions
apply under the Distribution Agreement to GEHC’s use
and disclosure of the source code after release.
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Under the Distribution Agreement, all intellectual
property rights relating to the Volpara software,
documentation and other proprietary material made
available to GEHC (including any modifications) are
VSL’s property.
VSL indemnifies GEHC and its affiliates against any
liability and expenses arising from a claim by a third
party that (i) GEHC’s use of the Volpara software, or
sale of Licences, in accordance with the Distribution
Agreement infringes a third party’s intellectual property
rights; or (ii) relates to wilful misconduct, negligence,
unauthorised representations or violation of any law
by VSL or its personnel. These indemnities are subject
to standard exclusions relating to claims arising from
a breach by GEHC of the Distribution Agreement, or
from unauthorised modifications to VSL’s intellectual
property or unauthorised representations made by
GEHC in respect of the Volpara software. VSL’s
liability in connection with this indemnity is not limited
to a monetary cap. However, VSL is excluded from
liability for any special, exemplary, indirect, punitive or
consequential damages (including lost profits, revenue
and business).
GEHC purchases the Licences and Services from VSL
at the prices agreed between GEHC and VSL under the
Distribution Agreement, and resells those Licences and
Services at a price determined at GEHC’s discretion.
The Distribution Agreement includes most favoured
customer pricing provisions in favour of GEHC.
VSL is subject to detailed and wide-ranging obligations
to establish and maintain administrative, physical and
technical safeguards to protect information that VSL
receives, and/or that the Volpara software processes,
in connection with the Distribution Agreement and the
Licences and Services from unauthorised access,
use or disclosure. Particularly strict obligations apply
where that information relates to an identified or
identifiable natural person, including health information
(protected health information).
These obligations are set out in the Privacy and Data
Protection schedule to the Distribution Agreement, and
in the PHI Agreement.
The Privacy and Data Protection schedule applies
generally to all confidential information to which VSL
may gain access in connection with the Distribution
Agreement, including protected health information.
The PHI Agreement applies specifically to protected
health information – as further defined in, and as
governed by, the United States Health Insurance
Portability and Accountability Act of 1996 (HIPAA).
The PHI Agreement applies where VSL obtains
access to any protected health information from a
customer to whom GEHC has sold a Licence, and to
whom GEHC is itself providing services that involve
handling or disclosing protected health information.
The PHI Agreement is intended to ensure that GEHC’s
own obligations under HIPAA apply directly to VSL in
relation to that protected health information.
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VSL’s obligations under the schedule and/or the PHI
Agreement include:
• an obligation to ensure that the information is
used only as strictly necessary for the purposes
of performing services under the Distribution
Agreement, and for no other purpose;
• detailed obligations in relation to restricting
physical access to VSL sites where the
information is processed, and technical access
to accounts and systems through which the
information may be accessed;
• an obligation to notify GEHC in the event of
any security incident (i.e., any loss, theft or
unauthorised use, access or disclosure of the
information);
• in respect of protected health information, an
obligation to comply with HIPAA generally, and
in particular the standards established by the
US Department of Health and Human Services
under HIPAA relating to the security of electronic
protected health information and the privacy of
individually identifiable health information; and
• an obligation to obtain GEHC’s approval
before moving the information, or allowing the
information to be moved, outside the GEHCapproved hosting jurisdiction(s).
The Privacy and Data Protection schedule requires
VSL to bear any losses and costs reasonably and
directly incurred by GEHC relating to any security
incident experienced by VSL.
Under the PHI Agreement, VSL indemnifies GEHC and
its personnel against all actual and direct losses, and
all liability to third parties, arising in connection with
any breach of the PHI Agreement, or any VSL acts or
omissions related to the PHI Agreement.
In each case, the terms provide for a monetary cap to
apply to VSL’s liability, corresponding to the limits of
VSL’s insurance coverage set out in the Distribution
Agreement (currently set at US$2.4 million per
occurrence).
VSL has agreed to notify GEHC as soon as
commercially reasonable if VSL initiates a formal sales
process for its stock or applicable business which
would, if completed, result in a change of control of
VSL. Any change of control of VSL may be deemed an
assignment of the Distribution Agreement, for which
GEHC’s consent is required. To avoid doubt, the Offer
does not constitute a change of control under the
Distribution Agreement.
The Distribution Agreement is governed by the laws of
the state of New York.
2.Siemens Master Reseller Agreement
Volpara Solutions Limited (VSL), the Company’s
wholly owned subsidiary, has entered into a Master
Reseller Agreement with Siemens Medical Solutions
USA, Inc. (Siemens), as amended by agreement
between VSL and Siemens (Master Reseller
Agreement). Under the Master Reseller Agreement,
Siemens may resell the Volpara software and related
services (primarily installation and training).
There is no minimum purchase guarantee or obligation
on Siemens under the Master Reseller Agreement.
3.Underwriting Agreement with Morgans Corporate
Limited
The initial term of the Master Reseller Agreement
expires on 30 June 2018. After that date, the term
may be extended for further 1-year periods by mutual
consent.
The Offer has been underwritten by Morgans Corporate
Limited (Lead Manager) pursuant to an underwriting
agreement between the Company and the Lead
Manager (Underwriting Agreement). Under the
Underwriting Agreement, the Lead Manager has agreed
to arrange, manage and underwrite the Offer.
Siemens may terminate the Master Reseller
Agreement at any time if certain events occur,
including:
• if VSL is in material default of any of the
provisions of the Master Reseller Agreement and
that default is either incapable of remedy or is not
remedied within 30 days after being given notice
to do so by Siemens;
• if VSL is in default of any of the principles and
requirements of the Code of Conduct for Siemens
Suppliers which (if capable of remedy) is not
remedied within a reasonable period established
by Siemens; and
• if VSL is in default of the prohibition set out in
the Master Reseller Agreement against making
any improper payment or gift to any Siemens
personnel or agent or representative.
The Master Reseller Agreement is non-exclusive.
Siemens may market and sell competing products to
the Volpara software, and (subject to the non-compete
restriction described below) VSL may supply its
software and services to third parties.
Where Siemens has requested delivery of a Volpara
product directly to a Siemens’ customer’s site, VSL
may not pursue that customer’s business or directly
sell the same products to that customer for 1 year
following shipment, unless that customer is a preexisting customer of VSL.
Siemens acknowledges under the Master Reseller
Agreement that all intellectual property rights in the
Volpara software are VSL’s property.
Under the Master Reseller Agreement, VSL agrees to
indemnify Siemens, and end users to whom Siemens
resells Volpara software, against any liability arising
from a claim by a third party that the Volpara software
infringes a third party’s intellectual property rights.
VSL’s liability in connection with this indemnity is
not limited to a monetary cap. However, the Master
Reseller Agreement provides for VSL to be excluded
from liability for any indirect, incidental, special or
consequential damages.
Siemens purchases the Volpara software and
related services the subject of the Master Reseller
Agreement from VSL at the prices agreed between
VSL and Siemens under the agreement, and resells
them to customers at a price determined at Siemens’
discretion. The Master Reseller Agreement includes
most favoured customer pricing provisions and
provisions that limit VSL’s ability to raise the prices
during the term of the Agreement. VSL is also required
to work with Siemens to achieve price reduction goals.
Fees
The Company must pay the Lead Manager
management, underwriting and selling fees totalling
4% of the total capital raised under the Offer, together
with a further discretionary incentive and performance
fee of up to 1%. The Company has agreed to
reimburse the Lead Manager for certain costs and
expenses incurred in respect of the Offer, including
legal costs, travel and other out-of-pocket expenses.
Representations, warranties and undertakings
The Underwriting Agreement contains certain standard
representations, warranties and undertakings by the
Company to the Lead Manager. The representations
and warranties given by the Company include matters
such as the terms of issue of the Shares, restrictions
on voting or transfer of the Shares, no breach of
applicable laws and the ASX Listing Rules, content of
the Offer Documents, the due diligence process for the
Offer, the conduct of the Company, no breach of law
or action taken against the Company in relation to the
Offer or the Prospectus, no misleading or deceptive
conduct by the Company in connection with the Offer,
no breach of material contracts, and solvency.
The undertakings given by the Company include that
the Company will not, without the prior written consent
of the Lead Manager, issue any further securities until
6 months after Shares have been issued under the
Offer, subject to certain exceptions, not breach laws in
a material respect and not vary the Constitution until
after Shares have been issued under the Offer.
The representations and warranties given by the Lead
Manager to the Company relate to matters such as
due incorporation, capacity and power, and that it has
not engaged in, and will not engage in, conduct that
is misleading or deceptive (including by omission), or
conduct that is likely to mislead or deceive, in relation
to the Underwriting Agreement or the Offer, except
to the extent that such conduct is caused, induced or
contributed to by the acts or omissions of the Company
or its respective directors, officers, employees, agents
or advisers, or caused by the Lead Manager’s reliance
on information contained in an Offer Document or
other information provided by or on behalf of the
Company, or its directors, officers, employees, agents
or advisers in connection with the Offer.
The Master Reseller Agreement is governed by the
laws of the Commonwealth of Pennsylvania.
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Indemnity
The Company has undertaken to indemnify each of the
Lead Manager and certain affiliated persons against
all claims and liabilities incurred in connection with the
Offer. This indemnity is subject to certain exceptions,
including fraud, negligence, wilful misconduct and
criminal penalties or fines.
Termination events
The Lead Manager may terminate the Underwriting
Agreement at any time prior to the issue of Shares
under the Offer, if certain events occur, including:
• the Company fails to lodge the Prospectus with
ASIC in a form approved by the Lead Manager;
• a statement contained in the Prospectus is
misleading or deceptive (including by omission)
or likely to mislead or deceive or becomes
misleading or deceptive or a material matter is
omitted from the Prospectus;
• the Prospectus does not comply with the
Corporations Act, the ASX Listing Rules or any
other applicable law;
• unconditional approval (or conditional approval
subject only to customary conditions) is refused
or not granted by ASX to the Company’s
admission to the Official List, or the official
quotation of all of the Shares on ASX within a
specified time, or if granted, the ASX approval
is subsequently withdrawn, qualified (other than
by customary conditions) or withheld or ASX
indicates to the Company or the Lead Manager
that approval is likely to be withdrawn, qualified
(other than by customary conditions) or withheld;
• the Company withdraws the Prospectus or the Offer;
• the Lead Manager reasonably forms the view
that a supplementary prospectus must be lodged
with ASIC and the Company does not lodge a
supplementary prospectus in the form and with
the content, and within the time, reasonably
required by the Lead Manager;
• ASIC applies for an order under sections 1324B
or 1325 of the Corporations Act in relation to
the Offer, the Prospectus and the Application is
not dismissed or withdrawn before the date the
Shares are allotted;
• ASIC gives notice of intention to hold a hearing
in relation to the Offer or the Prospectus under
section 739(2) of the Corporations Act or makes
an order under section 731 or an interim order
under section 739(3);
• an application is made by ASIC for an order under
Part 9.5 of the Corporations Act in relation to the
Offer or the Prospectus or ASIC commences any
investigation or hearing under Part 3 of the ASIC
Act in relation to the Offer, the Prospectus;
• any person gives a notice under section 730 of
the Corporations Act in relation to the Prospectus;
• at any time before completion of the Offer, the
S&P/ASX 200 Index closes at a level that is 10%
or more below the level of that index at 5:00 pm
(Sydney time) on the trading day immediately
prior to the date of the Underwriting Agreement
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and remains at or below that level for a period of
three consecutive trading days at any time before
the Settlement Date;
• any event set out in the timetable in the
Prospectus is delayed for more than three
business days after the last date on which the
event must be performed, unless the Lead
Manager consents to a variation (which consent
must not be unreasonably withheld or delayed);
• any circumstance arises after lodgement of
the Prospectus that results in the Company
repaying the Application Payments received from
Applicants or offering Applicants an opportunity
to withdraw their Applications for Shares and be
repaid their Application Payment;
• certain insolvency events occur with respect to
the Company;
• ASIC or any other Government Agency
(including the New Zealand Companies Office or
the New Zealand Financial Markets Association)
commences or threatens to commence any
hearing, inquiry, investigation, proceedings
or prosecution, or takes any regulatory action
or seeks any remedy, in connection with the
Company, the Offer or the Prospectus;
• the Company does not provide a Certificate as
and when required by this Agreement; or
• the Company is or becomes unable, for any reason,
to issue the Shares on completion of the Offer.
The Lead Manager may terminate the Underwriting
Agreement at any time prior to the issue of Shares
under the Offer, if certain events occur which the Lead
Manager believes are reasonably likely to have a
material adverse effect on the outcome of the Offer or the
condition or financial position of the Company, including:
• the Due Diligence Report or any other
information supplied by or on behalf of the
Company to the Lead Manager in relation to the
Due Diligence process, Shares, the Company,
the Offer or the Prospectus is or becomes
untrue, incorrect, misleading or deceptive
(including by omission);
• any material adverse change occurs in or
affecting the assets, liabilities, financial position
or performance, profits, losses, prospects or
condition, financial or otherwise of the Company;
• a material contract referred to in the Prospectus
is, without the prior written consent of the
Lead Manager, amended or varied, breached,
terminated, or becomes void, voidable, illegal,
invalid or unenforceable (other than by reason
only of a party waiving any of its rights), is
rescinded or avoided or its performance is or
becomes illegal;
• the introduction of legislation into the parliament
of the Commonwealth of Australia, any state
or territory of Australia, New Zealand, the
United Kingdom, the United States of America,
Singapore or the People’s Republic of China
(other than any legislation which had been public
before the date of the Underwriting Agreement;
• the public announcement of prospective
legislation or policy by the Australian Federal
Government or the government of any Australian
state or territory or the Government of New
Zealand;
• the adoption by ASIC, the New Zealand
Companies Office, the New Zealand Financial
Markets Association or their delegates or the
Reserve Bank of Australia of any regulations or
policy which does or is likely to prohibit, restrict
or regulate the Offer;
• the Company contravenes the Corporations
Act, its Constitution, the ASIC Act, any of the
ASX Listing Rules, New Zealand securities
laws or any other applicable law or regulation;
• any of the warranties or representations by the
Company in the Underwriting Agreement or
the Lead Manager’s mandate are or become
materially untrue or incorrect;
• the Company is in default of any of the material
terms and conditions of the Underwriting
Agreement or breaches any undertaking
or covenant given or made by it under the
Underwriting Agreement and that default or
breach is either incapable of remedy or is not
remedied within 10 business days after being
given notice to do so by the Lead Manager;
• without the prior written consent of the Lead
Manager, the Company disposes, or agrees to
dispose, of the whole, or a substantial part, of its
business or property other than as contemplated
in the Prospectus, ceases or threatens to cease
to carry on business, alters its capital structure
(debt or equity), other than as contemplated in
the Prospectus;
• a general moratorium on commercial banking
activities in Australia, New Zealand, the United
States of America or the United Kingdom is
declared by the relevant authority in any of those
countries, or there is a disruption in commercial
banking or security settlement or clearance
services in any of those countries;
• trading in all securities quoted or listed on ASX,
NZX, the London Stock Exchange or the New
York Stock Exchange is suspended or limited in
a material respect for at least one day on which
that exchange is open for trading;
• any adverse change or disruption to the
existing financial markets, political or economic
conditions of, or currency exchange rates or
controls in, Australia, New Zealand, the United
States of America or the United Kingdom, or the
international financial markets;
• after the date of the Underwriting Agreement, a
change or development (which was not publicly
known prior to the date of the Underwriting
Agreement) involving a prospective adverse
change in taxation affecting the Company or the
Offer occurs;
• there is an outbreak of hostilities (whether or not
war or a national emergency has been declared)
not presently existing, or a major escalation
in existing hostilities occurs, or a major act of
terrorism occurs in or involving Australia, New
Zealand, the United Kingdom, the United States of
America, Japan or the People’s Republic of China;
• any of the following occurs:
(a) a Director or the CEO of the Company is
charged with an indictable offence relating to a
financial or corporate matter or is disqualified
from managing a corporation under Part 2D.6 of
the Corporations Act or any other applicable law;
(b) a Director of the CEO of the Company
engages in any fraudulent conduct or activity; or
(c) any governmental agency or regulatory
body commences any public action against the
Company, the CEO of the Company or any of its
Directors, or announces that it intends to take
such action;
• other than as disclosed in the Prospectus, a
change to the Board or the CEO or CFO of the
Company occurs;
• other than as disclosed in the Prospectus,
the Company charges or agrees to charge or
creates any encumbrance over, the whole, or a
substantial part of its business or property;
• a statement in any certificate is false, misleading,
inaccurate or untrue or incorrect;
• any person (other than the Lead Manager
seeking to rely on this provision) gives a notice
under section 733(3) of the Corporations Act
or any person who has previously consented to
the inclusion of its name in the Prospectus (or
any replacement or supplementary prospectus)
withdraws that consent; or
• a person other than ASIC or any other
government agency commences any inquiry,
investigation or proceedings, or takes any
regulatory action or seeks any remedy, in
connection with the Company, the Offer or the
Offer Documents.
10.9 Litigation and claims
As at the Prospectus Date, so far as the Directors are
aware, there is no current or threatened civil litigation,
arbitration proceedings or administrative appeals, or
criminal or governmental prosecutions of a material
nature in which VHT or any of its subsidiaries is
directly or indirectly concerned which is likely to have
a material adverse impact on the business or financial
position of VHT.
10.10 Consents and disclaimers
Chapter 6D of the Corporations Act imposes a
liability regime on the Company (as the offeror of
the Shares), the Directors of the Company, persons
named in the Prospectus with their consent as
proposed directors of the Company, any underwriters,
persons named in the Prospectus with their consent
as having made a statement in the Prospectus and
persons involved in a contravention in relation to the
Prospectus, with regard to misleading or deceptive
statements made in the Prospectus. Although the
Company bears the primary responsibility for the
Prospectus, other parties involved in the preparation
of the Prospectus can also be responsible for certain
statements made in it.
In light of the above, each of the parties referred to
below (each a Consenting Party), to the maximum
extent permitted by law, expressly disclaims all
liabilities in respect of, makes no representations
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with regard to, and takes no responsibility for, any
statements in or omissions from this Prospectus, other
than the reference to its name in the form and context
in which it is named and a statement or report included
in this Prospectus with its consent as specified below.
Each of the following parties has given and has
not, before the lodgement of the Prospectus with
ASIC, withdrawn its written consent to be named in
this Prospectus in the form and context in which it
is named. None of the following parties referred to
below has made any statement that is included in this
Prospectus or any statement on which a statement
is made in this Prospectus is based, other than as
specified below:
a) Morgans Corporate Limited;
b) Simmonds Stewart;
c) Norton Rose Fulbright Australia;
d) Boardroom Pty Limited;
e) Deloitte;
f) Spruson & Ferguson;
g) RSM; and
h) Craigs Investment Partners Limited.
Deloitte has given, and has not withdrawn prior to the
lodgement of this Prospectus with ASIC, its written
consent to the inclusion in this Prospectus of extracts
of its audit report and review report in Section 4 and
the statements specifically attributed to it in the text of
this Prospectus, in the form and context in which they
are included in this Prospectus.
RSM has given, and has not withdrawn prior to
the lodgement of this Prospectus with ASIC, its
written consent to the inclusion in this Prospectus
of statements by it, including its Investigating
Accountant’s Report in Section 8 and the statements
specifically attributed to it in the text of this
Prospectus, in the form and context in which they are
included in this Prospectus.
Spruson & Ferguson has given, and has not
withdrawn prior to the lodgement of this Prospectus
with ASIC, its written consent to the inclusion in
this Prospectus of its IP Report in Section 9 and the
statements specifically attributed to it in the text of this
Prospectus, in the form and context in which they are
included in this Prospectus.
10.11 ASX waivers
The Company has applied for and obtained in-principle
waivers from ASX Listing Rule 10.14 in connection with
the proposed grant of options to the executive director,
from ASX Listing Rule 6.10.3 to the extent necessary
to set the “specified time” to determine whether a
Shareholder is entitled to vote at a Shareholders’ meeting
in accordance with the requirements of the relevant
New Zealand legislation and from ASX Listing Rule 1.1
(Condition 11) to allow the existing options issued under
the Legacy ESOP to continue on issue following the
Company’s admission to the Official List despite those
options having an exercise price lower than A$0.20.
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10.12 Investor considerations
Before deciding to participate in this Offer, you should
consider whether the Shares to be issued are a
suitable investment for you. There are general risks
associated with any investment in the stock market.
The value of Shares listed on the ASX may rise or fall
depending on a range of factors beyond the control of
the Company. You should carefully read the key risks
set out in Section 5.
If you are in doubt as to the course you should follow,
you should seek advice on the matters contained
in this Prospectus from a stockbroker, solicitor,
accountant or other professional adviser.
The potential tax effects relating to the Offer will vary
between investors. Investors are urged to consider the
possible tax consequences of participating in the Offer
by consulting a professional tax adviser.
10.13 Australian tax considerations
The comments below provide a general summary
of Australian tax issues for Australian tax resident
Shareholders who acquire Shares under this Prospectus.
The categories of Shareholders considered in this
summary are limited to individuals, companies (other
than life insurance companies), trusts, partnerships
and complying superannuation funds that hold their
Shares on capital account.
These comments do not consider the consequences
for foreign resident Shareholders, insurance
companies, banks, Shareholders that hold their
Shares on revenue account or carry on a business
of trading Shares or Shareholders who are exempt
from Australian tax. These Shareholders should seek
independent professional advice.
These comments also do not consider the
consequences for Shareholders who are subject to
Division 230 of the Income Tax Assessment Act 1997
(the Taxation of Financial Arrangements or TOFA
regime). Shareholders who are subject to TOFA should
obtain their own tax advice as to the implications
under TOFA (if any).
This summary is based on the Income Tax
Assessment Act 1936 (1936 Act), the Income Tax
Assessment Act 1997 (1997 Act), the New Tax System
(Goods and Services Tax) Act 1999 (GST Act),
applicable case law and published Australian Taxation
Office rulings, determinations and administrative
practice in force at the Prospectus Date. This
summary does not take into account the tax law of
countries other than Australia.
Australian tax laws are complex. The summary
is general in nature and is not intended to be an
authoritative or complete statement of the applicable
law. The precise implications of ownership or disposal
of the Shares by Shareholders will depend upon each
Shareholder’s specific circumstances. Shareholders
should seek their own professional advice on the tax
implications of holding or disposing of the Shares,
taking into account their specific circumstances.
1.Dividends paid on Shares
a) Australian resident individuals and complying
superannuation entities
Dividends paid by the Company on a Share will
constitute assessable income of an Australian
tax resident Shareholder. Australian tax resident
Shareholders who are individuals or complying
superannuation entities should include the
dividend in their assessable income in the year
the dividend is paid, together with any franking
credit attached to that dividend.
Such Shareholders should be entitled to a tax
offset equal to the franking credit attached
to the dividend, subject to being a “qualified
person” (refer comments below). Where the tax
offset exceeds the tax payable on the investor’s
taxable income, such Shareholders should be
entitled to a tax refund.
To the extent that the dividend paid by the
Company is unfranked, the investor will
generally be taxed at their prevailing marginal
rate on the dividend received with no tax offset.
b) Corporate Shareholders
Corporate Shareholders are also required to
include both the dividend and the associated
franking credit in their assessable income. A tax
offset is then available up to the amount of the
franking credit attached to the dividend.
An Australian tax resident Corporate
Shareholder should be entitled to a credit in
its own franking account to the extent of the
franking credit on the dividend received. This
allows the Corporate Shareholder to pass on
the benefit of the franking credits to their own
Shareholders on the payment of dividends.
Excess franking credits received by Corporate
Shareholders cannot give rise to a refund,
however may be converted into carry forward
tax losses.
c) Trusts and partnerships
Shareholders who are trustees (other than
trustees of complying superannuation entities)
or partnerships should include the dividend and
associated franking credit in determining the net
income of the trust or partnership. The relevant
beneficiary or partner may be entitled to a tax
offset equal to the beneficiary or partner’s share
of the franking credits included in the net income
of the trust or partnership.
d) Shares held at risk
The benefit of franking credits can be denied
where a Shareholder is not a “qualified person”,
in which case the Shareholder will not need to
include an amount for the franking credits in
their assessable income and will not be entitled
to a tax offset.
Broadly, to be a qualified person, a Shareholder
must satisfy the holding period rule and, if
necessary, the related payment rule. The
holding period rule requires a Shareholder
to hold the Shares “at risk” for more than 45
days continuously, measured as the period
commencing the day after the Shares were
acquired and ending on the 45th day after
the Shares become ex-dividend. The dates
the Shares are acquired and disposed of are
ignored for the purposes of determining the
45-day period. The holding period rule is subject
to certain exceptions, including where the total
franking offsets of an individual in a year of
income do not exceed $5,000. Special rules
apply to trusts and beneficiaries.
Under the related payment rule, a different
testing period applies where the Shareholder
has made, or is under an obligation to make, a
related payment in relation to the dividend. The
related payment rule requires the Shareholder to
have held the Shares at risk for the continuous
45-day period as above but within the period
commencing on the 45th day before, and ending
on the 45th day after the day the Shares become
ex-dividend. Investors should seek professional
advice to determine if these requirements, as
they apply to them, have been satisfied.
The Australian Government has recently
enacted a specific integrity rule that prevents
taxpayers from obtaining a tax benefit from
additional franking credits where dividends
are received as a result of “dividend washing”
arrangements. On 30 June 2014, the measure
received royal assent and the new rule will apply
to distributions made on or after 1 July 2013.
Shareholders should consider the impact of this
legislative change and any guidance issued by
the Australian Taxation Office in this regard,
given their own personal circumstances.
2.Disposal of Shares
The disposal of a Share by a Shareholder will be a
capital gains tax (CGT) event. A capital gain will arise
where the capital proceeds received on disposal
exceeds the CGT cost base of the share (broadly the
amount paid to acquire the share plus any transaction/
incidental costs). In the case of an arm’s length onmarket sale, the capital proceeds will generally be the
cash proceeds received from the sale of Shares.
A CGT discount may be available on the capital
gain for Shareholders that are individuals, trustees
or complying superannuation entitles provided the
particular Shares are held for more than 12 months
prior to sale. Any current year or carry forward capital
losses should offset the capital gain first before the
CGT discount can be applied.
The CGT discount for individuals and trusts is 50% and
for complying superannuation entities is 33%. In relation
to trusts, the rules are complex, but this discount may
flow up to beneficiaries of the trust.
A company is not entitled to a CGT discount.
119
10
A capital loss will be realised where the capital proceeds
on disposal are less than the CGT reduced cost base
of the Shares. Capital losses may only be offset against
capital gains realised by the Shareholder in the same
income year or future income years, subject to certain
loss recoupment tests being satisfied. Capital losses
cannot be offset against other assessable income.
3.Tax File Numbers
A Shareholder is not required to provide their tax file
number (TFN) to the Company. However, if TFN or
exemption details are not provided, Australian tax
may be required to be deducted by the Company
from distributions at the top marginal tax rate plus the
Medicare levy.
A Shareholder that holds Shares as part of an
enterprise may quote its Australian Business Number
rather than its TFN.
4.Australian Goods and Services Tax (GST)
Shareholders should not be liable for GST in respect
of their acquisition of the Shares.
An Australian resident Shareholder that is registered
for GST may not be entitled to claim full input tax
credits in respect of GST on expenses they incur that
related to the acquisition, redemption or disposal
of the Shares (e.g. lawyers’ and accountants’ fees).
Shareholders should seek their own advice on the
impact of GST in their own particular circumstances.
5.Stamp duty
No stamp duty should be payable by Shareholders on
the acquisition of Shares.
Investors should seek their own advice as to
the impact of stamp duty in their own particular
circumstances.
10.14 New Zealand tax considerations
The following is a summary of the New Zealand tax
implications of investing in the Shares if a Shareholder
is an individual, a company, or a trust investing in the
Shares who is a tax resident in New Zealand.
Distributions a Shareholder receives from the
Company will generally be taxable dividends for
New Zealand tax purposes. Some distributions the
Shareholder receives from the Company may not be
taxable dividends (for example, non-taxable bonus
issues and certain returns of capital).
New Zealand operates an imputation regime under
which income tax paid by the Company gives rise to
credits known as imputation credits. Imputation credits
may be attached to dividends the Company pays to its
Shareholders. A New Zealand resident Shareholder
may use imputation credits attached to dividends to
offset their tax liability in respect of the dividends.
The maximum ratio at which the Company can attach
imputation credits to dividends is 28:72 (that is, $28 of
imputation credits to $72 of cash dividend).
The Company generally will be required to deduct
resident withholding tax (RWT) from dividends it
120
pays to a Shareholder. Currently, the rate of RWT
on dividends is 33% less the amount of imputation
credits attached to the dividend. Accordingly, where
imputation credits are attached to dividends at the
maximum permitted ratio (that is, the dividends are
fully imputed), RWT equal to 5% of the gross dividend
(that is, cash plus imputation credits) will be deducted.
Unless the New Zealand resident Shareholder
has notified the Company that they hold a valid
certificate of exemption from RWT and has provided
the Company with a copy of the certificate, RWT is
deducted from any dividend to the extent that the
dividend is imputed at a rate less than 33%.
Filing an income tax return
If a New Zealand resident Shareholder is an individual
who is not otherwise required to file an income
tax return, receiving dividends from the Company
generally will not change that. It is noted that the
Shareholder may consider filing a tax return if their top
marginal tax rate is less than 33%. In such instances
the Shareholder may be able to reduce tax on other
income or receive a refund of some or all of the RWT
deducted from dividends paid to the Shareholder.
When filing a tax return, the Shareholder must include
in their taxable income not only the cash dividend
received, but also the imputation credits attached
to, and RWT deducted from, the dividend. The total
amount included in taxable income is referred to as
the gross dividend. The Shareholder will be able to
use attached imputation credits and a credit for RWT
deducted to satisfy (or partially satisfy) tax liability on
the gross dividend. If the attached imputation credits
and RWT deducted exceed the amount of tax on the
gross dividend, the Shareholder’s tax liability on other
income earned may be reduced as a result of receiving
the Company dividend.
Tax on sale or disposal of Shares
Although New Zealand does not have a general capital
gains tax, there are instances where a Shareholder
will be subject to New Zealand tax on gains made
on the sale or disposal of Shares or be allowed a
deduction for any loss made. The Shareholder must
consider their individual circumstances to determine
whether any gain on the sale or disposal of the
Company’s Shares will be taxable (or loss deductible).
Generally, a Shareholder will be subject to tax on any
gain (or allowed to deduct any loss) arising from the
sale or disposal of Shares if the Shareholder:
• is in the business of dealing in Shares;
• acquires Shares as part of a profit-making
undertaking or scheme; or
• acquires Shares with a purpose of selling them.
The Shareholder’s taxable gain (or tax-deductible loss)
will be the difference between the cost of Shares and
the amount received on the disposal of these Shares.
If the Shareholder has a taxable gain, they will be
required to include that gain in a tax return for the tax
year in which the sale occurs. The Shareholder will
need to pay any tax owing in respect of that gain at the
Shareholder’s marginal tax rates.
Stamp Duty
New Zealand no longer has stamp duty. Consequently,
no stamp duty is payable on the issues of Shares or on
subsequent transfer of the Shares.
GST
No New Zealand GST liability should arise either on
the issue of the Shares or on the subsequent transfer
of the Shares.
10.15 International Offer restrictions
1.Hong Kong
WARNING
The contents of this document have not been
reviewed by any regulatory authority in Hong Kong.
You are advised to exercise caution in relation
to the Offer. If you are in any doubt about any of
the contents of this document, you should obtain
independent professional advice.
This document has not been registered by the Registrar
of Companies in Hong Kong pursuant to the Companies
(Winding Up and Miscellaneous Provisions) Ordinance
(Chapter 32) of the Laws of Hong Kong (CWMO).
Accordingly: (i) the Shares may not be offered or sold
in Hong Kong by means of any document other than to
persons who are “professional investors” as defined
in the Securities and Futures Ordinance (Chapter 571)
of the Laws of Hong Kong (SFO) and any rules made
under the SFO, or in other circumstances which do
not result in the document being a “prospectus” as
defined in section 2(1) of the CWMO or which do not
constitute an offer to the public within the meaning
of the CWMO or an invitation to the public within the
meaning of the SFO; and (ii) this document must not
be issued, circulated or distributed in Hong Kong
other than (1) to “professional investors” as defined
in the SFO and any rules made under the SFO, (2)
to persons and in circumstances which do not result
in this document being a “prospectus” as defined in
section 2(1) of the CWMO or which do not constitute
an offer to the public within the meaning of the CWMO
or an invitation to the public within the meaning of the
SFO or (3) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provisions
of the SFO and CWMO.
2.Singapore
This document and any other materials relating to the
Offer of the Shares have not been, and will not be,
lodged or registered as a prospectus in Singapore
with the Monetary Authority of Singapore. Accordingly,
this document and any other document or materials
in connection with the offer or sale, or invitation for
subscription or purchase, of Shares, may not be issued,
circulated or distributed, nor may the Shares be offered
or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly,
to persons in Singapore other than to an “institutional
investor” under Section 274 of the Securities and
Futures Act, Chapter 289 of Singapore (the SFA), (ii) to
a “relevant person” pursuant to Section 275(1), or to any
person pursuant to Section 275(1A), and in accordance
with the conditions specified in Section 275, of the SFA
or (iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
In the event that you are not an investor falling within
any of the categories set out above, please return this
document immediately. You may not forward or circulate
this document to any other person in Singapore. Any
offer is not made to you with a view to the Shares
being subsequently offered for sale to any other party.
There are on-sale restrictions in Singapore that may
be applicable to investors who acquire Shares. As
such, investors are advised to acquaint themselves
with the SFA provisions relating to resale restrictions in
Singapore and comply accordingly.
3.United Kingdom
Neither the information in this document nor any other
document relating to the offer has been delivered for
approval to the Financial Conduct Authority in the
United Kingdom and no prospectus (within the meaning
of section 85 of the Financial Services and Markets
Act 2000, as amended (FSMA)) has been published or
is intended to be published in respect of the Shares.
This document is issued on a confidential basis to
“qualified investors” (within the meaning of section
86(7) of FSMA) in the United Kingdom, and the Shares
may not be offered or sold in the United Kingdom by
means of this document, any accompanying letter or
any other document, except in circumstances which
do not require the publication of a prospectus pursuant
to section 86(1) FSMA. This document should not be
distributed, published or reproduced, in whole or in
part, nor may its contents be disclosed by recipients to
any other person in the United Kingdom.
Any invitation or inducement to engage in investment
activity (within the meaning of section 21 of FSMA)
received in connection with the issue or sale of the
Shares has only been communicated or caused to
be communicated and will only be communicated or
caused to be communicated in the United Kingdom in
circumstances in which section 21(1) of FSMA does
not apply to the Company.
In the United Kingdom, this document is being
distributed only to, and is directed at, persons (i) who
have professional experience in matters relating to
investments falling within Article 19(5) (investment
professionals) of the Financial Services and Markets
Act 2000 (Financial Promotions) Order 2005 (FPO),
(ii) who fall within the categories of persons referred
to in Article 49(2)(a) to (d) (high net worth companies,
unincorporated associations, etc.) of the FPO or (iii)
to whom it may otherwise be lawfully communicated
(together “relevant persons”). The investments to
which this document relates are available only to, and
any invitation, offer or agreement to purchase will be
engaged in only with relevant persons. Any person
who is not a relevant person should not act or rely on
this document or any of its contents.
4.United States
This Prospectus has been prepared for publication in
Australia and may not be released or distributed in the
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10
United States. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy,
securities in the United States.
Any securities described in this Prospectus have
not been, and will not be, registered under the US
Securities Act and may not be offered or sold in the
United States except in transactions exempt from, or
not subject to, registration under the US Securities Act
and applicable US state securities laws.
10.16 Governing law
This Prospectus, the Offer and the contracts formed
on acceptance of Applications under the Offer are
governed by the laws in force in the State of New
South Wales, Australia and each Applicant submits
to the non-exclusive jurisdiction of the courts of New
South Wales, Australia.
10.17 Statement of Directors
Each Director has authorised the issue of this
Prospectus and consented (and has not withdrawn their
consent) to the lodgement of this Prospectus with ASIC.
122
11
GLOSSA RY
123
11
GLOSSARY
The following terms used in this Prospectus have the following meanings unless the context otherwise requires.
124
TERM
DEFINITION
Affordable Care Act
The US Patient Protection and Affordable Care Act
Allotment Date
The date the Company anticipates the Shares will be allotted and issued to
Applicants
Applicant
A person who makes an Application for Shares under this Prospectus
Application
An application to subscribe for Shares under this Prospectus
Application Form
The application form attached to or accompanying this Prospectus
Application Payment
The monies payable in connection with an Application
ASIC
Australian Securities and Investments Commission
ASX
ASX Limited (ACN 008 624 691) or the financial market it operates, as the context
requires
ASX Listing Rules
The official listing rules of ASX as amended or waived from time to time
ASX Settlement
ASX Settlement Pty Limited, ABN 49 008 504 532
ASX Settlement Operating Rules
The operating rules of ASX Settlement as amended from time to time, except to the
extent of any express written waiver by ASX Settlement
BAA
Business Associate Agreements
BI-RADS
Breast Imaging-Reporting and Data System
Board or Board of Directors
The board of directors of the Company
Breast Density
The percentage of the breast which is not fatty tissue
Breast MRI
A supplemental breast cancer imaging modality typically used to image women with a
very high risk of developing breast cancer
Broker
Any ASX participating organisation selected by the Lead Manager and the Company
to act as Broker to the Offer
Broker Firm Offer
The offer of Shares under this Prospectus to Australian and New Zealand resident
investors who are not Institutional Investors and have received a firm allocation from
their Broker, as described in Section 7
CE
Conformité Européenne (European Conformity)
Cloud
An Internet-based globally distributed network of configurable computing resources
(networks, servers, storage, applications and services) used for secure information
storage and retrieval
Companies Act
The New Zealand Companies Act 1993
Company
Volpara Health Technologies Limited, New Zealand company number 2206998 /
ARBN 609 946 867
Completion
Settlement and allotment of the Shares under the Offer
Constitution
The constitution of the Company
TERM
DEFINITION
CPS or Convertible Preference
Shares
The convertible preference shares of the Company on issue as at the Prospectus
Date that will automatically convert to Shares immediately prior to Official Quotation
Corporations Act
The Australian Corporations Act 2001 (Cth) as amended from time to time
Deloitte
Deloitte (New Zealand)
Digital Breast Tomosynthesis
A 3D form of mammography used for screening in the US and assessment outside
the US
Director or Directors
A director or the directors of the Company
FDA
United States Food and Drug Administration
HIPAA
The US Health Insurance Portability and Accountability Act of 1996
IFRS
The International Financial Reporting Standards
Institutional Investors
An investor to whom offers or invitations in respect of securities can be made without
the need for a lodged prospectus (or other registration or formality, other than a
formality which VHT is willing to comply with), including in Australia persons to whom
offers or invitations can be made without the need for a lodged prospectus under
section 708 of the Corporations Act
Institutional Offer
The invitation to Institutional Investors under this Prospectus to acquire Shares, as
described in Section 7
Lead Manager
Morgans Corporate Limited, ABN 49 010 669 726
Legacy ESOP
The employee share option plan adopted by the Company prior to 31 January 2016
Mammography
X-ray of the breast; standard breast cancer screening protocol
Morgans
Morgans Corporate Limited, ABN 49 010 669 726
New ESOP
The employee share option plan adopted by the Company after 31 January 2016
OEM
Original equipment manufacturer
Offer
The offer of Shares under this Prospectus
Offer Documents
The documents issued or published by or on behalf of VHT in respect of or relating
to the Offer including a Pathfinder Prospectus, this Prospectus, the Application Form
and any investor presentation
Offer Period
The period expected to be from 4 April 2016 to 15 April 2016 during which investors
may subscribe for Shares under the Offer
Offer Price
A$0.50
Official List
The official list of ASX
Official Quotation
Official quotation of securities by ASX
PHI
Protected health information
Prospectus
This document (including the electronic copy of this prospectus) and any
supplementary or replacement prospectus in relation to this document
Prospectus Date
24 March 2016
125
11
126
GLOSSARY
TERM
DEFINITION
QDE
Quasi-dividend entitlement, being the distribution available to holders of CPS
RSM
RSM Financial Services Australia Pty Limited, ABN 22 009 176 354
Securities Act
The New Zealand Securities Act 1978
Share
A fully paid ordinary share in the capital of the Company
Shareholder
A person registered from time to time on the Company’s register of Shares as a
holder of one or more Shares
Share Registry
Boardroom Pty Limited, ABN 14 003 209 836
Spruson & Ferguson
Spruson & Ferguson Pty Limited, ABN 55 601 269 050
TGA
The Therapeutic Goods Act 1989 (Australia)
US Securities Act
The US Securities Act of 1933
VHT
Volpara Health Technologies Limited (New Zealand company number 2206998;
ARBN 609 946 867)
Volpara Group
VHT; Volpara Solutions Limited; Volpara Solutions Inc; and Matakina UK Limited
Volpara Products
VolparaDensity, VolparaDoseRT, VolparaAnalytics and VolparaServer
Whole Breast Ultrasound
A supplemental breast cancer screening modality less affected by breast density
than mammography
12
CORP OR ATE DIREC TORY
127
12
CORPORATE DIRECTORY
Volpara Health Technologies Limited
Level 12, 86 Victoria Street
Wellington 6011
Board of Directors
Roger Allen AM, Chairman
Dr Ralph Highnam, Executive Director, CEO
Professor Sir John Michael Brady, Non-Executive Director
John Pavlidis, Non-Executive Director
John Diddams, Non-Executive Director
Lyn Swinburne AM, Non-Executive Director
Lead Manager
Morgans Corporate Limited
Level 29, 123 Eagle Street
GPO Box 202
Brisbane QLD 4000
Co-lead Manager
Craigs Investment Partners Limited
158 Cameron Road
Tauranga 3110
New Zealand Legal Adviser
Simmonds Stewart
Level 6, 15 Courtenay Place
Te Aro, Wellington 6011
Australian Legal Adviser
Norton Rose Fulbright Australia
Level 18, 225 George Street
Sydney NSW 2000
Investigating Accountant
RSM Financial Services Australia Pty Limited
Level 13, 60 Castlereagh Street
Sydney NSW 2000
Auditor
Deloitte
Deloitte House
10 Brandon Street
Wellington 6011
Share Registry
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
128
13
A PPLIC ATION FORM
129

Prospectus

Transcription

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