Startech gets $20 million equity line; Gastar enters into C$89 million stock agreement with Chesapeake

By Sheri Kasprzak

New York, Sept. 19 - Startech Environmental Corp. led PIPE news to start off the week with word that it sealed a $20 million equity line agreement with Cornell Capital Partners, LP.

The two-year agreement allows Cornell to buy shares of Startech at 96% of the lowest closing bid price for the five trading days after notice of a draw. There is a $2 million limit on each draw.

Startech had 23,077,136 outstanding common shares as of Sept. 15.

For the equity line transaction, Monitor Capital, Inc. was the placement agent.

Cornell also funded a $2.3 million convertible debenture offering for Startech.

The one-year debentures bear interest at 10% annually and are convertible into common shares at $1.84 each.

Cornell received warrants for 650,000 shares, exercisable at $2.53 each for three years.

"We've been working closely with Cornell through these past months," said Joseph Longo, the company's president, in a statement. "The Cornell team has skillfully crafted a financing package whose sweep and flexibility is in harmony with our manufacturing and marketing plans. Especially important to us is the fact that the Cornell on-demand SEDA financing will also allow the company to secure certain long-lead inventory items in advance, and thereby give our customers faster delivery schedules."

As to Startech's earnings, the company managed to cut its net losses over the second quarter of 2004.

For the quarter ended July 31, 2005, the company's net losses totaled $845,014, compared to $1,011,043 for the same quarter in 2004.

Based in Wilton, Conn., Startech is a waste disposal company focused on the production of a plasma converter system that turns waste into other products.

The company's stock gained $0.05, or 1.98%, to finish at $2.57 Monday.

Looking to the broader market, sellsiders said an absence of biotech offerings Monday may be the result of a slight dip in stocks within the sector at the end of last week. However, one market source said he believes drug makers will be back in the PIPE market this week with more offerings.

"I'd say they're [biotech issuers] being cautious," he said when asked about the apparent lack of PIPE offerings Monday. "You'll start to see more coming in as the week progresses, especially among the smaller companies. The big names seem to be struggling a bit, but there's still plenty of demand."

Gastar's C$89 million stock deal

Moving to the energy sector, Houston's Gastar Exploration Ltd. said Monday that Oklahoma City-based Chesapeake Energy Corp. has agreed to buy up to C$89 million and at least C$84 million of its stock.

Chesapeake will buy 19.9% of Gastar's outstanding shares at a price equal to the lesser of C$3.31 each or the average closing price of Gastar's stock for the three trading days immediately before the offering closes. The minimum average price is C$3.15. The number of shares being sold is roughly 26.9 million. Gastar presently has 135.2 million outstanding common shares.

The stock sale is expected to close Oct. 31.

Under the full terms of the agreement, Chesapeake will also receive a 33% working interest in Gastar's Deep Bossier play in eastern Texas and the two will establish an area of mutual interest for exploration in 13 eastern Texas counties.

Proceeds from the sale will be used to accelerate drilling in eastern Texas and reduce short-term debt. The rest will be used for general corporate purposes.

The announcement sent Gastar's stock sailing 13.13%, or C$0.47, Monday, to close at C$4.05.

"Gastar is very excited to partner with Chesapeake, not only on a working-interest basis in our East Texas activities, but also corporately through Chesapeake's equity investment in Gastar," said J. Russel Porter, the company's president and chief executive officer, in a statement. "This transaction will result in Gastar's current business plan being fully funded through 2006 to pursue its operating plans in East Texas. We are proud that Chesapeake has decided to assist us in this endeavor."

Gastar isn't a stranger to the PIPE market. On July 5, the company completed a C$21,904,706 deal composed of 6,617,736 shares at C$3.31 each.

Elsewhere in the energy sector, Cano Petroleum, Inc. raised another $8,694,000 from a previously announced private placement of stock.

In this most recent closing, the Fort Worth, Texas-based oil explorer sold 2.1 million shares at $4.14 each to a Boston-based institution.

The price per share was a 4% premium to the company's closing stock price of $3.98 on Sept. 16.

As already reported in PIPE Daily, Cano raised $10,779,996 from a private placement of 2,603,864 shares on Sept. 13.

The proceeds will be used for general corporate purposes and working capital.

Cano's stock finished Monday up C$0.07 at C$4.05.

ERF stock gains 9%

Wireless broadband provider ERF Wireless Inc. saw its stock jump by more than 9% after it announced the closing of a $1.5 million private placement of convertible notes.

The company sold the 6% notes to four institutional investors - Global Capital Fund, LP; GCA Strategic Fund Ltd.; HIPL Family Trust and DP Securities Inc.

The two-year notes are convertible into common shares at the lesser of $3.50 each or 85% of the average of the three lowest volume weighted average prices for the 10 trading days immediately before notice of conversion.

The investors received warrants for 389,999 shares, exercisable at $3.57 each for five years.

Proceeds from the offering will be used to acquire key targets in the wireless broadband industry. The rest will be used for general corporate purposes.

"The closing of this new round of financing from Global Capital Funding Group comes at a particularly opportune time for ERF Wireless," said the company's chairman H. Dean Cubley in a statement released Monday afternoon. "While we've already begun executing our acquisition strategy, this funding will allow ERF Wireless to move more quickly and decisively to close additional deals in a shorter period of time."

Cubley, according to the statement, has worked with Global Capital in a previous financing for another public company.

ERF is based in League City, Texas.

Acacia-CombiMatrix's stock slips 3%

Acacia Research Inc. subsidiary CombiMatrix Corp. saw its stock dip more than 3% on Monday after announcing Friday that it is about to close a $10,536,746 direct stock offering.

The company's stock edged down a nickel Monday to end at $1.58 and then lost another $0.03 in after-hours trading.

Acacia Research said on Friday that it plans to sell shares of CombiMatrix at $1.65 each.

After the impending settlement was announced Friday morning, Acacia Research-CombiMatrix's stock plummeted 17.68%, or $0.35, to finish at $1.63.

The shares will be issued under Acacia's shelf registration.

CombiMatrix develops technologies to determine roles of genes, gene mutations and proteins for use in the biotechnology sector.

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