Tornado Medical Systems has told officials in Thunder Bay it is pulling out of the city because of cash flow and revenue issues.

Tornado CEO Stefan Larson said the project the medical imaging company was working on — a device to be used in operating rooms to analyze breast tissue for tumours — has gotten too expensive. He said the company currently has cash flow issues, so it laid off six engineering employees working on the project. Larson said a seventh person with specialized skills would be transferred to another project.

Tornado CEO Stefan Larson said the company has laid off six employees. (Tornado Medical Systems)

Larson noted Tornado will honour its two-year lease agreement with the city for its office space in the Whalen Building.

Paul Inksetter, the chair of the Thunder Bay Community Economic Development Corporation, said he was shocked and disappointed by the news, and added the Tornado lab was a key element of the medical cluster the city has been trying to build.

Inksetter said the company's demise shows there is no sector of the economy that is immune from the ups and downs of the business cycle. He said the city will continue to work on building a medical cluster.

Inksetter said he fully expects Tornado will meet its obligations to the city as the leaseholder and to government funding agencies that put money into the project.

The business held its grand opening just over a year ago.

The lights are out in the office at Tornado Medical Systems — a company that held its official grand opening slightly more than a year ago. City officials were told Friday that Tornado has cash-flow problems. (Nicole Ireland/CBC)

Tornado's head office is in Toronto, but it was expected to significantly add to its workforce of seven employees in Thunder Bay.

“They were in the process of ramping up when I last spoke with them,” said Steve Demmings, the CEO of Thunder Bay's Community Economic Development Commission.

Major investments made

Just three months ago, the federal government announced a repayable investment in Tornado. The $360,000 was to help develop an operating room device to analyze breast tumour tissue.

The Northern Ontario Heritage Fund has provided almost $500,000 to Tornado, partly a loan and partly a conditional grant for the same project.

There were substantial renovations to the sixth floor of the Whalen Building. The Northern Heritage Fund paid the $1.1 million dollar cost of the renovations.

Councillor Mark Bentz said those expenses are typically recoverable but he's not sure if that's happened yet.

“When the city itself does leasehold improvements, we're supposed to recapture those through the leasing of the space," Bentz said. “I'm certainly interested in finding out what our investment was, and [what] we recoup[ed].”

However, City Manager Tim Commisso said he believes the city has not provided any direct investments.

The cost of attracting Tornado to the city included millions spent on a new building for the Social Services Board — a paying tenant in the Whalen Building that left to make way for Tornado, Councillor Ken Boshcoff said

In a press release issued on May 11, 2011, at the company’s grand opening, the city said it hoped the “renovations will help reposition the 98-year-old Whalen Heritage Building and tie it into the synergies being created by the emerging Waterfront Development. Tornado Medical Systems is the first of many high-end, professional information and communications technology-related users that will be attracted to this unique location.”

It now appears the city’s plans to create a highly educated workforce using the talents of graduates from Confederation College and Lakehead University have taken a step backwards.

“They're high-end jobs,” Demmings said. “They're exactly the type of businesses that are growing in Thunder Bay in terms of medical cluster."