PIPE volume grinds to halt as week winds down; Advanced Research Technologies raises $5 million

By Sheri Kasprzak

New York, July 28 - New private placement issuance in the United States was virtually non-existent Thursday as the week wound down and potential issuers continued putting out earnings reports instead of offerings.

"It's near the end of the week, things tend to slow down a bit anyway," said one market source when asked if earnings season may have been keeping volume down again Thursday. "Earnings has something to do with it as well. There's something to that."

A noticeable change in volume was seen Wednesday as a slate of earnings reports were released. That may continue into next week, said one sell-sider, but issuance is expected to pick up to levels seen the previous week, he said.

"Once we get past this, it'll be back to normal," he said. "Stocks are shaping up better than they have in a long time, which suggests to me that [market] conditions are good for these deals. Expect to see a bunch of them, I'd say, by the middle of next week."

Meanwhile, stocks continued to rise on Thursday. The Dow wrapped up 68.46 higher to close at 10,705.55, the Nasdaq composite index gained 12.22 to end at 2,198.44 and the S&P 500 edged up 6.93 to close at 1,243.72.

Meager private placement news was led Thursday by a $21 million preferred stock offering closed by Naturade, Inc.

The Irvine, Calif.-based health supplement manufacturer sold a total of 21 million shares of series C convertible preferred stock to Quincy Investments Corp., Health Holdings and Botanicals LLC and Westgate Equity Partners, LP at $1 each.

The preferreds are initially convertible into one common share at $1 each and pay annual dividends equal to 20% of the amount by which the company's pretax profits for the year exceed $10 million.

Quincy also received 30,972,345 common shares. However, the pricing of the common shares could not be determined by press time Thursday.

The investors all received warrants for a total of 24 million shares, exercisable at $1 each through July 22, 2006.

In exchange for the preferreds, Health Holdings cancelled 41,054,267 common shares and Westgate cancelled 13,540,723 series B preferreds.

A second offering for Naturade

In addition to the preferreds offering, Naturade also announced the closing of a $4 million financing from Laurus Master Fund, Ltd.

Laurus bought a $1 million term loan and a $3 million revolving credit line.

The note and the credit line bear interest at Prime plus 200 basis points, mature July 26, 2008, and are convertible into common shares at $0.80 each.

Laurus also received warrants for up to 8,721,375 shares at $0.02 each.

"The Laurus credit facility will enable Naturade to focus on business expansion and take us well beyond the day-to-day management of cash flow by supporting growth internally and through acquisition," said the company's chief executive officer, Bill Stewart, in a statement.

"We chose Laurus Funds from several other alternatives because they offered us a flexible credit instrument. We are exceptionally pleased to have a financing partner who can support our long-term vision of maintaining and growing our portfolio of leading natural brands marketed under the Naturade umbrella."

The cash infusions boosted the company's stock by more than 108%. Naturade's stock gained $0.13 to end at $0.25 Thursday.

The proceeds raised from the preferred and common shares sold to Quincy will be used to finance Naturade's acquisition of Ageless Foundation Inc., Symco Inc. and Symbiotics Inc. Proceeds from the credit line and note will be used for working capital and acquisitions.

According to its latest earnings report, Naturade had 44,533,886 outstanding common shares as of April 30.

The company sustained a net loss of $316,599 for the quarter ended March 31, 2005, down from a net loss of $468,467 for the corresponding period in 2004.

Advanced Research raises $5 million

Moving to the technology sector, Advanced Research Technology Inc. closed a $5 million convertible debenture offering, the company announced Thursday.

The Montreal-based medical device company sold the 9% debentures to investors in the United States.

The debentures mature on Jan. 28, 2008 and are convertible into common shares at C$0.99 each.

The investors, which have the option to buy another $2.5 million in principal, also received warrants for 1,110,139 shares at C$1.16 each for five years and 123,349 shares at C$1.39 each for five years.

Advanced Research closed another private placement of convertible debentures, these bearing interest at 7%, on July 11. The most recent closing brings to $10.9 million the proceeds the company has raised in private placements this month.

"With the successful conclusion of this convertible debt offering, we have succeeded in attracted new, sophisticated, U.S. institutional investors, which to us represents a firm endorsement of our future growth strategy for our SoftScan and eXplore Optix products," said Micheline Bouchard, the company's president, in a statement.

Advanced Research develops optical molecular imaging products for the healthcare and pharmaceutical industries. The proceeds will be used for clinical development and trials on its SoftScan product. The remainder will be used for enhancements to one of its products - eXplore Optics.

The company's stock closed unchanged at C$0.90 Thursday.

Great Western prices C$1.5 million deal

North of the border, where issuance was almost as weak as it was in the United States Thursday, Great Western Minerals Group Ltd. announced its plans to head the private placement market with a C$1.5 million unit offering.

The Cardinal Crescent, Saskatchewan-based mineral exploration company plans to sell up to 1.5 million units at C$1 each.

The units include one flow-through share, one non flow-through share and one half-share warrant. The whole warrants allow for an additional non flow-through share at C$0.70 each for 18 months.

Union Securities Ltd. is the placement agent.

Proceeds will be used for exploration and development of properties in Saskatchewan and the United States.

On Thursday, Great Western's stock gained C$0.05 to close at C$0.60.

aeroTelesis's stock continues to climb

A day after Los Angeles-based communications company aeroTelesis announced that it had received a $100 million equity line, its stock continued to soar.

The company's stock gained $0.20, or 13.33%, to end at $1.70 Thursday.

On Wednesday, when the financing was announced, the company's stock jumped $0.26, or 18.98%, to end at $1.63.

aeroTelesis agreed to sell shares to Cornell Capital Partners, LP at 99% of the lowest volume weighted average price for five trading days after notice of a draw.

The company also received $3 million from a convertible debenture offering with Cornell and Highgate House Funds, Ltd. The debentures are convertible at $1.117 each.

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