Please remember to include name (I will add city and state to mine) and number of shares held in the spaces provided at the bottom.
Here it is, in full:
Subject (for email subject line): Titan Medical Shareholder Letter
To Titan Medical Inc. Board of Directors and Management:
As we are sure that all of you are aware, the current state of the company and its future are uncertain. This petition is being sent individually by each member of a collection of owners of Titan Medical stock to express concerns regarding how our investments have been managed to date and what the future may hold for our investments and for the company, and to suggest reforms which we feel may improve the outlook for all involved. We hope these will be taken to heart and strongly considered for action.
Fundraising to date has been much less effective than the program requires, putting not only the schedule, but the entire program and company in jeopardy along with all the funds invested by numerous private investors such as ourselves. As investors, dilution of the stock is becoming a major concern, exacerbated by the continued drop in Price Per Share. Issuing shares and warrants continues dilution of our investments, and due to the low share price, is much less effective. In addition, the issuing of warrants has historically provided no additional value to warrant holders, thus furthering the need for better strategies for fundraising. We were never told of a backup plan for the “Jugu deal” as it was known colloquially, so we must question if there ever was one.
As a collective group of investors, we have been exceedingly disappointed with the level of communication by Titan management with us and with the general public. We agree from the limited public exposure the SPORT system has had to date that Titan has a viable product, capable of entering the marketplace with a substantial impact to patient outcomes as well as investor outcomes. We constantly seek out information to validate this theory, but the general public does not. They remain completely uninformed about SPORT and its potential, and therefore they do not seek to contribute supportive investment dollars which could raise the Price Per Share.
We feel that Titan Medical has an obligation to greatly enhance the public exposure of the SPORT system. The SAGES conference initiated some good exposure and conversation on the internet about SPORT’s capabilities, but that has diminished over time. The AORN presence did much less; it would have benefitted greatly from an instrument on site showing its capabilities, and given the audience at AORN consisting largely or OR support personnel, more focus on ease of setup and use, simpler case turnover processes, and reduction of expense versus the competition. The WRGC presence was surely beneficial but was not as widely publicized as we would have anticipated. Further enhancing the exposure of SPORT to the general public should include a more professional web presence on the corporate web site, the posting of more videos displaying the capability of the instrument, a more active marketing presence in applicable trade journals (paper and digital) and conferences, and press releases to spread good news about the system and the company. Lately we have needed to scan SEDAR filings for status updates, and most of these have not portrayed the organization in a positive light. We believe that substantially increasing and enhancing the company’s image and highlighting SPORT’s capabilities will vastly improve the ability to entice larger investments. An improvement in Price Per Share is a cornerstone of this strategy, both to minimize further dilution and to give adequate confidence to potential investors that their investments will become profitable. Potential investors and potential customers must be able to learn about SPORT and the benefits it could provide to patients and hospitals, and without the necessary exposure, we believe this will not happen.
The sales and marketing team appears to be relying on the fact that some of them once participated in the Intuitive Surgical success story. This bit of resumé trivia will not sell systems if SPORT reaches the marketplace, nor is it going to improve our Price Per Share or attract new investment dollars. We feel that in order to improve the situation, the Board of Directors should mandate that the current marketing team be given 30 days to put forth a viable, coherent marketing plan to achieve the objectives stated above, and an additional 60 days thereafter to begin executing the plan and show the effectiveness thereof. Evidence of effectiveness should include an increase in Price Per Share and a marked increase in inquiries from surgeons and hospitals (e.g. through the company web site) about the SPORT system. Failure to achieve success on both of these goals should be considered grounds for termination of key marketing personnel, as we believe these goals are inherently the purpose of their positions in the company. We also believe that reaching these goals will enable successful fundraising in the future to keep the program moving without interruption while minimizing future dilution.
The current management team is no longer trusted by the investor base. At the AGM in 2015, it was clearly stated that the program was funded to the completion of FDA submission. This has proven to be far from the truth. At the AGM in 2016, we were told that management has “Never been so confident in the future of Titan.” Two months later, Dr. Fowler tendered his resignation. Given the importance of this man to the program, we would have expected notification more than one or two days in advance, and we would expect to be informed as to why he resigned and what specific plans are in place to fill the roles he vacated within the organization. This did not happen. Earlier, it was announced that Dr. Hargrove was no longer Chairman of the Board. Several months later, there is still no replacement for this position and no indication that there is an honest effort to find one. We believe it is reasonable to request that the Board of Directors initiate a viable search (if not already under way) for a candidate with a track record of successful medical device launches and experience raising capital for pre-market development programs. We are also requesting periodic status updates, preferably every two weeks, posted on the Titan Medical web site under the Investor relations menu. This would represent a stark contrast to the minimalist approach Titan has historically used for investor communications, and these sparse communications are among our primary concerns.
To accompany the distrust much the management team has fostered among investors, their actions on some issues and inactivity on other issues have called into question some basic competencies we would expect of personnel in their positions. As noted above, competencies should include the ability raise and manage adequate funding for program goals, communicating objectives, schedules, and expenditures with shareholders, and ensuring the continued viability of the program. None of these activities have been performed well. Amongst the shareholder group, we have various areas of expertise including surgical experience, finance and investment people, and medical device development experience. We understand the amount of work which routinely goes into such a development program, and we understand that the revised FDA guidelines pertaining to Human Factors Engineering may have required moderate redesign of a few human interface components. The required redesign effort should not have thrown the program into a metaphorical tailspin, but this appears to have happened. We have no indication from the company that costs are under control or that the suspension of development work will be lifted at any specific time. Given that Mr. Laviolette is on the Ximedica Board of Directors and is also the Chairman of the Board for Titan’s competitor TransEnterix, it could be questioned as to whether the disruption of work at Ximedica was truly warranted. Titan chose them for development work before this apparent conflict of interest developed, but without evidence to the contrary we can suspect it may take more than a reasonable effort from Titan before Ximedica resumes work on our program. We have not been informed as to whether or not Mr. Laviolette has recused himself from all decisions pertaining to Titan Medical. Nearly every day, the question arises on the InvestorsHub message board as to whether legal action should be taken due to the way our investments appear to have been mismanaged. In all cases thus far, it has been determined by other message board contributors that such legal action would be detrimental to both the future of the company and to our investments. Based on these and other factors, we feel that the aforementioned Chairman of the Board should also be prepared to lead potential searches for replacements for Mr. Hargrove and Dr. Rayman. If Mr. Randall’s M&A experience is not projected to come into play in Titan’s near-term future, he could also be considered expendable and replaceable, given the financial woes the company continues to face under his tenure as CFO. Frankly, we find the recent option awards to be an insult to the entire existing investor base. If replacement of any of these key individuals is not determined to be in the best interest of the company, we would like the reasons for their retention to be communicated and performance criteria for their positions to also be made known, and they should be held to these standards.
In a similar theme, the investor community frequently expresses disdain for the apparent inactivity of EVC. As with the personnel mentioned above, we see almost no evidence that EVC is fulfilling any contractual obligation to provide services to Titan Medical. We have been told that someone at EVC does monitor the InvestorsHub message board daily to gauge the overall sentiment, but we feel that makes it even more inexcusable to remain so inactive, when they are specifically mentioned so frequently on the message board. We feel that EVC should be given one opportunity of limited scope and duration to showcase their abilities and properly represent Titan Medical, not only to existing investors, but more importantly, to new investors to attract the needed capital to continue the program on a reasonable schedule. If they cannot prove their value, they should be replaced with minimal delay.
To initiate a policy of more open communications, we request that the company publicize the answers to the following shareholder questions:
Did the recent offering raise sufficient funds to cover the six month advance for Ximedica and Plexus to resume the SPORT development efforts?
If not, what is the financing plan moving forward?
What is the status of the search for a new Chairman of the Board and what is the anticipated completion?
Has the SPORT timeline changed substantially due to the recent events, and if so, what is the new proposed timeline?
Even if the answers are not generally favorable, Titan’s investors deserve to know these aspects of how our investments are being handled. We truly hope the organization has the courage to provide open and honest answers, and to continue to provide updates on major issues.
In summary, we, as Titan Medical shareholders, have grave concerns over the future of our investments with Titan, and we feel that the aforementioned issues should be addressed in an attempt to improve the outlook of the program, the technology, and our investments. We are truly pleased with reports we have heard from those who were fortunate enough to observe the SPORT system in action, and we believe the instrument is too valuable to the marketplace (including surgeons, hospital budgets, and most importantly patient outcomes) to allow it to flounder. We find an absolute need for improvement in communications at all levels with us, with potential investors, and with potential future customers who should be informed that something better is forthcoming for their robotic surgery expenditures. We would like to see evidence of reasonable performance by key management personnel and contracted organizations to fulfill publicized goals. A plan should be made known for raising the appropriate funds, hopefully without excessive dilution to current shareholders, by which adequate capital can be raised to resume development work with contractors such as Ximedica and Plexus. We would also like to know why the funding deals from the Asian market were ultimately not completed.
A device as capable as the SPORT system deserves a fighting chance to reach the market. Sparse communication at all levels has been a key component to bring the program to stagnation, and we feel that it is not too late to turn it around, but this will require some difficult decisions and changes to be made.
We appreciate your time and consideration.
Name:
Shares held as of 23 September 2016:
