DrugMax to pocket $51.1 million from unit offering; Cyberkinetics raises $11.4 million

By Sheri Kasprzak

New York, Sept. 27 - DrugMax, Inc. led a particularly high-volume day for private placements, raising $51,104,340 from its private placement of units.

DrugMax finished two separate tranches of the offering, selling 41,487,432 units at $1.1525 each in the first tranche and 2,606,000 units at $1.2625 each in the second tranche, all to institutional and accredited investors.

The company had 20,019,495 outstanding common shares as of Aug. 10.

The units consist of one share and one half-share warrant. Warrants issued in the first tranche are exercisable at $1.09 each for five years, and warrants issued in the second tranche are exercisable at $1.20 each for five years.

The deal will be funded on Oct. 3.

After the offering was announced Tuesday morning, DrugMax's stock gained 9.17%, or $0.11, to end the day at $1.31.

The offering will put the specialty pharmacy company back in compliance with Nasdaq's listing requirements. The company had received a notice that it was no longer in compliance with Nasdaq's rule requiring the company's market value of listed securities to be at least $35 million.

Proceeds from the deal will be used to partially redeem 17,000 series A preferred shares valued at $17 million. The rest will be used to pay down senior debt and provide growth capital to expand its base of specialty pharmacies.

Leon Berman, a spokesman for DrugMax, did not return several calls for additional comment on the offering.

"DrugMax's success at entering into definitive agreements for a total of $51.1 million and the recent signing of a commitment letter for the $65 million credit facility with Wells Fargo Retail Finance underscores the confidence the capital and financial markets have in our business model and growth plans," said Ed Mercadante, the company's chief executive officer, in a statement.

"We appreciate the strong support we received from both our new institutional investors and new banking facility partner.

"As we focus on our goal of building a specialty pharmacy platform with multiple sales channels, serving both patients and providers, we remain committed to making decisions that are in the best interest of all of our shareholders and positioning the company for sustained profitable growth."

Earnings-wise, DrugMax's net losses have skyrocketed.

For the quarter ended June 30, 2005, the company reported a net loss of $7,164,979, up from a net loss of $719,609 reported for the second quarter of 2004.

DrugMax is based in Farmington, Conn.

Cyberkinetics closes $11.4 million stock deal

In the biotech sector, Cyberkinetics Neurotechnology Systems, Inc. issued 9.5 million of its shares for proceeds of $11.4 million.

The shares, sold to institutional and accredited investors, were priced at $1.20 each.

The investors also received warrants for 4.8 million shares, exercisable at $1.60 each.

The closing was announced Tuesday morning. By day's end, the company's stock slipped 7.88%, or $0.13, to finish the day at $1.52.

Rodman & Renshaw, LLC and Seven Hills Partners, LLC were the placement agents for the offering.

Proceeds from the offering will be used to launch the company's NeuroPort System. The rest will be used for clinical studies on the BrainGate system and for general corporate purposes.

Based in Foxborough, Mass., Cyberkinetics develops brain-to-machine interfaces to diagnose neurological disorders.

PIPE volume soars as oil eases

As oil prices settled down on Tuesday, one market source said PIPE volume in general got a boost, even though stocks closed mixed.

"Oil has been kind of the bane of our existence for a while now," said the sellsider. "Now that it's eased, things are picking up a bit. I haven't really noticed if it's just in one sector, but it doesn't appear to be. I've seen things from just about every [sector] today."

Oil prices fell $0.75 Tuesday to close at $65.07 per barrel.

Stocks, on the other hand, closed mixed with the Dow Jones Industrial Average gaining 12.58 to end at 10,456.21, the Nasdaq composite index losing 5.04 to finish at 2,116.42 and the Standard & Poor's 500 composite index edging up 0.03 to end at 1,215.66.

AmeriServ raises $10.3 million

Heading to the banking sector, AmeriServ Financial, Inc. is gearing up to wrap a $10,299,756 private placement of shares with a group of six institutional investors led by Crestview Capital.

The offering includes 2,367,760 shares at $4.35 each and is scheduled to close Sept. 29. As of Aug. 1, the company had 19,731,472 outstanding common shares.

Lehman Brothers Inc. was the placement agent.

AmeriServ intends to contribute $1 million of the proceeds raised from the offering to subsidiary AmeriServe Financial Bank and $1 million to subsidiary AmeriServ Trust & Financial Services Co. The remainder will be used to redeem its outstanding 8.45% trust preferred securities.

This isn't the first time AmeriServ has tapped into the PIPE market. The company raised $25.65 million from the sale of 5.7 million shares at $4.50 each on Oct. 8, 2004.

The Johnstown, Pa.-based bank holding company is restructuring its balance sheet and intends to prepay $100 million in long-term convertible advances.

"We are extremely pleased by the vote of confidence by the professional investors who are participating in this sale," said Allan Dennison, the company's chief executive officer, in a statement. "We believe that the reduction of our debt burden and AmeriServ Financial Bank's leverage will improve our interest rate risk exposure and position us to continue the earnings improvement we have seen this year."

According to its latest earnings statement, AmeriServ posted net income of $370,000 for the quarter ended June 30, up from $254,000 for the same quarter of 2004.

On Tuesday, AmeriServ's stock gained $0.04 to close at $4.58.

Two gold offerings from Canada

Moving north of the border, Banro Corp. led two gold offerings arranged on Tuesday with a C$13 million stock deal.

The company plans to issue 2 million shares at C$6.50 apiece to investor Actis Capital LLP within the next two weeks.

The proceeds from the deal will be used to accelerate exploration on the company's gold projects in the Democratic Republic of the Congo.

"This investment by Actis provides important strategic benefits to the company and will enable Banro to increase its current exploration commitment to approximately US$28 million, which will allow the company to develop its three core projects, Twangiza, Namoya and Lugushwa, to the pre-feasibility stage by year-end 2006," said company chairman Simon Village in a statement. "We are especially pleased that Actis recognizes Banro's commitment to building a highly professional business at all levels, from the technical aspects to support for social development, and that this contributed to its decision to invest in the company."

"Actis is delighted to announce its investment Banro Corp. through the Actis Africa Fund II, managed by Actis, and the Canada Investment Fund for Africa, which is managed by Actis and Cordiant," said Peter Ruxton, investment principal of Actis, in a statement. "We are very impressed by Banro's exceptional minerals team and their high-quality gold projects in the eastern DRC."

Banro is based in Toronto. On Tuesday, its stock gained C$0.10 to close at C$7.05.

The other gold offering priced on Tuesday comes from Seabridge Gold Corp., another Toronto-based gold explorer.

Seabridge said it plans to sell 1 million shares at C$5.00 each to Pan Atlantic Bank and Trust Ltd., its majority shareholder.

The price per share is a 4.8% discount to the company's C$5.25 closing stock price on Monday.

The proceeds will be used for exploration on two of the company's Nevada projects and for working capital.

The gold offerings, one sellsider said, may be coming from word released Tuesday that gold prices may jump to more than $500 per ounce by next year. Gold prices actually fell on Tuesday, the market source said.

"Gold stocks, though, are up now just on the news that prices are likely to go up," said the Canadian market source. "We'll probably see more trickle in over the next week."

BPI stock climbs

BPI Industries Inc.'s stock gained 3.87% on Tuesday after announcing the completion of a $30,702,600 private placement.

The company's stock gained $0.07 Tuesday to close at $1.88.

On Monday, when the deal closed, the company's stock slipped $0.03 to end at $1.81.

BPI, a Cleveland-based coal-bed methane exploration company, sold shares to five institutional investors at $1.7057 each.

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