Sherwood Park, Alberta / ACCESSWIRE / January 29, 2015 / Virtutone Networks Inc. ("Virtutone" or the "Company") (TSX Venture: VFX.V) is providing an update on the current financial condition and status of the business of the Company. As noted in Virtutone's January 16, 2015 press release, one of Virtutone's biggest clients, based in London, United Kingdom, has been unable to make payments of a total amount of US$13.8 million. Although Virtutone's management has taken all the necessary steps in order to collect the payment, as of yet it has not received payment. As noted in the January 16 press release, the inability to collect on the payment has resulted in Virtutone having to suspend its operations. To reduce costs, all of Virtutone's staff have been laid off other than Jason Allen, President and Chief Executive Officer, and William N. Woods, Chief Financial Officer.
On January 23, 2015, the Company filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act (Canada) (the "BIA") and BDO Canada Limited ("BDO") has consented to act as Trustee under the proposal (the "Proposal") to the Company's creditors. The filing of the Notice of Intention will provide protection to the Company from its creditors in order to allow the Company time to make a formal Proposal to its creditors. During the process, BDO is required to monitor the operations of the Company and assist management in formulating its Proposal within the timeframes set out under the BIA and as determined by the courts. If the Company is unable to meet any of its deadlines or if the creditors do not accept the Proposal, the Company will be forced into bankruptcy proceedings. The Proposal, as currently contemplated by the Company, will allow the Company a period of time to attempt to collect its receivables in order to payout debts owing to its creditors.
On January 26, 2015, the Company received a demand letter from Royal Bank of Canada (the "Bank") demanding repayment of the line of credit and other amounts owing totaling approximately CDN$2.24 million. The indebtedness owing to the Bank is secured by a general security agreement over all of the assets of the Company. The Bank's demand will be stayed by the Company's filing of its notice of intention to make the Proposal.
As at the date hereof, the Company has approximately $26 million USD in accounts receivables, including the amounts owing from the United Kingdom entity, and approximately $17 million USD in accounts payable. A total of approximately $14.5 million USD of the accounts receivables, including approximately $12 million USD of the amounts owing from the United Kingdom entity, is insured by Export Development Canada ("EDC"). The Company has filed an insurance claim with the EDC with respect to amounts owing by the United Kingdom entity. Based on EDC policy, it is estimated that a minimum of 4 to 6 months may pass for EDC to either collect the receivables or payout the insurance.
As the outcome of the Company's current plans is uncertain, there is no certainty that the Company will resume operations. If the Company is able to successfully collect on its receivables or receive insurance proceeds in order to settle the indebtedness owing to its creditors, management and the Board of Directors of the Company will need to assess the Company's available options and determine a course of action that is in the best interests of the Company given the Company's financial conditions and prospects for business at such time.
For further information please contact our offices at 780-702- 5777 or visit our website www.virtutone.com
Forward-Looking Statements: This document may contain certain forward-looking information or statements ("Forward-looking statements") as defined under applicable securities legislation, including among, other things, the Company's intent to make the Proposal, the expected terms of the Proposal, the expected timing to collect the receivables, the expected timing for the Company to collect on the insurance claim with EDC and the Company's intent to assess the Company's options following making of the Proposal. Such Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these Forward-looking statements. These risks include, without limitation, risks related to: the ability to collect on any and all accounts receivable, the ability of the Company to meet the conditions for making the Proposal under the BIA, the willingness of the Company's creditors to accept the Proposal, whether all conditions have and will be satisfied in order for the Company to collect any proceeds under the insurance claim with EDC on the accounts receivable and the risks associated with any future business of Virtutone. Forward-looking statements are any statements other than statements of historical fact. The use of any "plan" "expect" "project" "believe" "should" "anticipate" or other similar words or statements that certain events "may" or "will" occur are intended to identify Forward-looking statements. In addition to the assumptions set out herein, the Forward-looking-statements contained herein are based on certain assumptions including, without limitation, assumptions regarding: the ability to collect on any and all accounts receivable, the ability of the Company to meet the conditions for making the Proposal under the BIA, the willingness of the Company's creditors to accept the Proposal and that the conditions will be satisfied in order for the Company to collect any proceeds under the insurance claim with the EDC on the accounts receivable. Although management believes the expectations reflected in the Forward-looking statements contained herein are reasonable, no assurances can be given that any of the events anticipated in the Forward-looking statements will occur, or, if they do, what benefits Virtutone will derive therefrom. As such readers are cautioned not to place undue reliance on the Forward-looking statements, which are effective only as of the date of this document or as of the date otherwise specifically indicated herein. Virtutone assumes no obligation to update Forward-looking statements, except as required by applicable law.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE: Virtutone Networks Inc.