TRM raises $40.4 million from stock deal; Arotech wraps $17.5 million convertible note offering

By Sheri Kasprzak

New York, Sept. 30 - TRM Corp. led PIPE news to end the week with word of the imminent closing of a stock offering by the company.

The Portland, Ore.-based company expects to issue 2,778,375 shares at $14.54 each to new and existing investors on Oct. 5.

As of June 30, TRM had 13,986,704 outstanding common shares.

Banc of America Securities LLC was the placement agent.

The deal was announced Friday morning. By the end of the day, the company's stock dipped $0.28 to close at $15.19.

Neither Kenneth Tepper, the company's chief executive officer, nor Thomas Mann, the company's chief operating officer had responded to requests for comment by Friday evening.

The company intends to use the proceeds for acquisitions and debt reduction.

TRM's net income declined just slightly from the second quarter of 2004. For the quarter ended June 30, 2005, the company reported net income of $2,708,000, down from net income of $2,862,000 for the corresponding quarter of 2004.

"During the second quarter of 2005, sales and expenses were affected by the decline in value of the U.S. dollar as compared to the British pound and the Canadian dollar," said TRM's latest earnings statement. "Approximately 33% of consolidated sales for the quarter were generated in the United Kingdom and Canada by our subsidiaries in those countries."

TRM provides ATM and photocopying services to retail outlets.

Arotech wraps $17.5 million deal

In other PIPE news, Arotech Corp., a company that manufactures defense and security products for the military and law enforcement agencies, completed a $17.5 million convertible note offering Friday.

The notes, purchased by five institutional investors, mature on March 31, 2008 and bear interest at Libor plus 600 basis points with a 12.5% ceiling and 10% floor.

The notes are convertible into common shares at $1.00 each. The conversion price is a 26% premium to the company's closing stock price of $0.79 on Sept. 28

After the deal was announced Friday morning, Arotech's stock lost $0.03 to close at $0.74.

The investors in the offering received one-year warrants for up to 5.25 million shares, exercisable at $1.10 each.

"We now have a solid base of companies and product lines and are demanding excellence from each and every part of our operations," said Robert Ehrlich, the company's chief executive officer, in a statement. "We will require all of them to contribute to profitability and we will take whatever steps are necessary to achieve it.

"Meanwhile, although we had hoped not to have to return the capital markets, the new financing, with a conversion price substantially above market, is an endorsement of the investors' confidence in our ability to meet these goals ... With the working capital from the financing and the streamlining of cost-cutting measures we are putting in place, we believe that we can grow our existing product portfolio, increase market share and achieve profitability."

As to its earnings, Arotech's sustained a net loss of $5,622,514 for the quarter ended June 30, 2005, up from a net loss of $4,396,123 in the year-ago period.

The Auburn, Ala., company intends to use $2.6 million of the proceeds to buy a letter of credit securing its obligation for future interest payments on the notes. The company has already used $5.4 million of the proceeds to complete the outstanding earn-out payment for the acquisition of its subsidiary FAAC Inc. so that former FAAC shareholders will not sell more shares of the Arotech stock issued to them as payment for the earn-out. The remainder will be used for working capital.

Tech deals get a boost

In the broader PIPE market Friday, one sellsider said he feels tech deals may make a comeback in the coming week.

"Tech stocks are on the rise," said the market source. "We're starting to see a few deals here and there, and I fully expect more this coming week. Biotech too, to a smaller extent, but I anticipate more from tech."

PIPE volume in the United States remained relatively strong at the end of the week, pushed in no small part by technology offerings.

KANA completes $4 million offering

Among those tech offerings was a $4 million deal settled by KANA Software, Inc.

The company sold 2,626,912 shares at $1.5227 each to a group of institutional investors led by NightWatch Capital.

The investors received warrants for 945,688 shares, exercisable at $2.284 each.

Proceeds will be used for working capital.

"The same two firms that invested $2.4 million in our common stock last June 30 have once again independently shown their confidence in KANA by investing another $4 million," said John Thompson, KANA's chief financial officer, in a statement. "Now that NightWatch Capital owns over 15% of the outstanding common stock, John Nemelka, managing principal of NightWatch, has been invited to join KANA's board of directors."

Based in Menlo Park, Calif., KANA produces customer service software.

The company's stock closed down a penny at $1.53 on Friday before losing another $0.06 in after-hours trading.

Canadian energy offerings

Heading up a busy day for Canadian PIPEs, Duvernay Oil Corp. priced a C$41.6 million stock deal Friday.

The Calgary, Alta.-based oil exploration company plans to sell 800,000 flow-through shares at C$52 apiece through a syndicate of underwriters led by Peters & Co. Ltd.

Proceeds from the offering, which is expected to close Oct. 18, will be used for exploration expenses on the company's Canadian properties.

The company's stock gained C$0.05 to close at C$42.35 Friday.

Another Calgary-based oil explorer, Bow Valley Energy Ltd., also arranged a private placement, this one for C$21,805,000.

The deal includes 3 million non flow-through shares at C$5.60 each and 700,000 flow-through shares at C$7.15 apiece.

The offering, also expected to close Oct. 18, is being placed through a syndicate of underwriters led by FirstEnergy Capital Corp.

Proceeds will be used for exploration on the company's North Sea properties and for general corporate purposes.

Bow Valley's stock closed unchanged Friday at C$5.84.

With the Canadian dollar at a 13-year high against the U.S. dollar, one market source north of the border said this may be fueling PIPEs there to a degree.

"A lot of it is just investor demand, oil deals and whatnot," he said. "The [Canadian] dollar being stronger doesn't hurt, I'm sure."

Jameson Inns stock slips 5.5%

Hotel operator Jameson Inns, Inc.'s stock dipped on Friday after the company announced the pricing of a $35 million convertible note offering earlier this week.

The company's stock dropped $0.12 to close at $2.06.

When the deal was announced Thursday, the company's stock dipped $0.08 to close at $2.18 before gaining a penny in after-hours trading.

The Atlanta-based company intends to issue notes with a conversion price of $2.77 each.

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