Earth Biofuels secures $52.5 million from notes sale; Force Protection raises $41.25 million from PIPE

By Sheri Kasprzak

New York, July 24 - Earth Biofuels, Inc.'s $52.5 million senior convertible notes offering headed up a comparatively active day for private placements as stocks rebounded Monday.

The company's stock fell by 6.45%, or 22 cents, to end the session at $3.19 after the deal was announced Monday afternoon (OTCBB: EBOF).

The 8% notes due 2011 are convertible at $2.90 each, a 15% discount to the company's $3.41 closing stock price Friday.

Under the terms of the notes, the coupon may drop to 6% in 2007, assuming Earth Biofuels meets certain financial milestones.

The investors in the offering received warrants for 9,051,725 shares, exercisable at $2.90 each.

Cowen & Co. was the placement agent.

Proceeds from the deal will be used to repay the company's 8% senior convertible notes previously issued. The rest will be used to acquire interests in biodiesel and ethanol production facilities.

The company issued $15 million in senior convertible notes in two separate closings earlier this year. On May 31, the company sold $5 million of the 8% notes, which were due in 90 days and were convertible at the greater of $1.00 or 75% of the market price on the initial maturity date. In the second closing, on June 8, the company sold $10 million of the 8% notes, which are due in September 2006 and are also convertible at the greater of $1.00 or 75% of the market price at the initial maturity date.

After the May closing, the stock fell 28 cents to close at $2.92, and after the June closing, the stock remained unchanged at $2.70.

According to the company's latest earnings statement, Earth reported a net loss of $6.48 million for the quarter ended March 31, compared with a net loss of $42,177 for the same quarter of 2005.

Earth Biofuels, based in Dallas, develops alternative fuels, including biodiesel.

In the broader market, stocks picked up and shoved PIPE action back into gear after a slump last week when stocks suffered substantial gains.

"You know how it goes," said one sellside market source on the rise in stocks. "One day, you'll have a 100-point loss and the next, it'll [the Dow Jones Industrial Average] be up 200 points or whatever. It's hard to gauge. It's very volatile these days. It's been an interesting time to price [PIPEs]."

In fact, the sellsider noted, some issuers have been backing out of deals they've priced because of volatile market conditions.

Even so, "if [stocks] keep making decent gains or even maintain some stability, I think [PIPE volume] will return to normal," the sellsider concluded.

On Monday, the Dow Jones Industrial Average climbed 182.67 to close at 11,051.50; the Nasdaq composite index was up 41.45 to end at 2,061.84; and the Standard & Poor's 500 composite index closed up 20.62 to settle at 1,260.91.

Force Protection's PIPE

Elsewhere in the private placement market, Force Protection, Inc. concluded a $41.25 million private placement of 8.25 million shares.

A group of 15 institutional investors, including John Hancock and Cortina Asset Management, bought the shares at $5.00 each, an 18.7% discount to the company's $6.15 closing stock price on Friday.

C.E. Unterberg, Towbin LLC was the placement agent.

The company's stock climbed by 3.41%, or 21 cents, to close at $6.36 Monday (OTCBB: FRPT).

"We are extremely pleased to make this announcement," the company's chief, Gordon McGilton, said in statement released late Monday afternoon. "The working capital generated by this financing will allow us to maintain focus on delivering cutting-edge armored vehicle technology to support U.S. and coalition troops in Iraq.

"We appreciate the investors who have participated in this financing. Their efforts will help ensure that more lives are saved by the cutting-edge blast protection technology incorporated in the Buffalo and Cougar vehicles."

Located in Ladson, S.C., Force Protection manufactures armored vehicles deployed by the U.S. military. The company also produces ballistic and mine-protected vehicles.

Micromet secures $8 million

In the biotech sector, Micromet, Inc. said it is gearing up to wrap an $8 million private placement of stock.

Funds managed by NGN Capital LLC have agreed to buy 2,222,222 shares at $3.60 each, a 7.3% discount to the company's $3.8816 closing stock price from Friday.

The investors will also receive warrants for 555,556 shares, exercisable at $5.00 each.

Cowen & Co. was the placement agent.

On Monday, the company's stock fell 29 cents, or 5.71%, to close at $3.59 (Nasdaq: MITI).

Proceeds will be used for research and development on the company's product candidates. The remainder will be used to relocate the company's headquarters to the East Coast from Carlsbad, Calif.

Connected to the deal, Peter Johann, a managing general partner with NGN, will join Micromet's board of directors.

Christian Itin, the company's chief executive officer, did not immediately return requests for additional comment on the offering by press time Monday. Micromet spokeswoman Susan Noonan noted that Itin is based in the company's world headquarters in Munich, Germany, and may not be available to comment right away.

"We would like to welcome Peter to the board," Itin said in a news release Monday. "Peter has longstanding experience in the commercialization of pharmaceuticals and served in senior functions running corporate and business development at pharmaceutical companies. His experience fits well with the corporate goals of an emerging biopharmaceutical company like Micromet."

"NGN is very familiar with Micromet and its exciting pipeline and BiTE platform technology," said Johann in a statement. "We are delighted to have the opportunity to make an investment in such an outstanding company. We look forward to working with the board of director and the management of the company to enhance the value of Micromet."

Micromet is a biotechnology company focused on developing antibody based products to treat cancer, autoimmune and inflammatory diseases.

eMagin to close PIPE

In other private placement action, eMagin Corp. is getting ready to close a $5.97 million private placement of 6% convertible debentures.

The notes mature Jan. 21, 2008. Half of the principal, if not converted, will be due July 21, 2007 and the remainder will be due at maturity.

The debentures are convertible into 22,192,301 common shares at $0.26 each.

The investors also will receive warrants for 1.92 million shares at $0.26 each through Dec. 14, 2006.

eMagin's stock closes down 7.7%, or 2 cents, to end at $0.24 (Amex: EMA).

Connected to the deal, director Paul Cronson, chief financial officer John Atherly, chief executive officer Gary Jones, senior vice president of display manufacturing and development operations Olivier Prache and chief marketing and strategy officer Susan Jones agreed to defer 10% of their compensation until eMagin becomes EBITDA positive.

Also, employees and directors have agreed to forfeit 4.7 million shares of existing stock options in return for repricing 8.8 million options at $0.26.

Proceeds will be used for working capital.

eMagin, based in Bellevue, Wash., develops high-resolution microdisplays used in virtual imaging technologies.

Stornoway leads Canadians

Moving to Canada, Stornoway Diamond Corp. led a slate of diamond offerings with a private placement for C$22.5 million as part of its acquisitions of Ashton Mining of Canada Ltd. and Contact Diamond Corp.

Agnico-Eagle Mines Ltd. purchased 17,629,084 subscription receipts at C$1.2763 each.

Of the receipts, C$20 million will be converted on a one-for-one basis into common shares of Stornoway once the acquisition is settled. The rest will be converted on the same basis if there is a drawdown on the C$32.5 million bridge loan facility Stornoway closed concurrently.

The bridge loan will be underwritten by a Canadian chartered bank and will mature the earlier of six months from the initial draw or 10 months from the date of the mailing of the Ashton acquisition.

Under the terms of the acquisition, Ashton shareholders will receive C$1.25 in cash or one Stornoway share plus a penny per Ashton share held. The maximum consideration for the acquisition is C$59.5 million.

Also, Stornoway has made an offer to acquire all of the outstanding shares of Contact Diamond Corp.

Under the terms of the Contact acquisition, each Contact shareholder will receive 0.36 of a Stornoway share per Contact share held, representing C$0.45 per Contact share.

"We are predicting a robust diamond market for the next 10 years or more," said Stornoway CEO Eira Thomas during a conference call Monday morning.

Following the transaction, Thomas said she will be the CEO of the combined company and Contact's chief, Matt Manson, will be the company's president.

"We feel this transaction creates a company with a much larger asset base," Thomas said in the conference call.

The stock remained unchanged at C$1.20 Monday (Toronto: SWY).

Vancouver, B.C.-based Stornoway is a diamond exploration company. Ashton is also based in Vancouver and is also a diamond explorer. Contact is a diamond exploration company based in Toronto.

In other diamond news, Legend International Holdings, Inc. saw its stock take off, gaining 22.22% Monday after the company priced a $2 million private placement on Friday.

The stock gained 20 cents to close at $1.10 (OTCBB: LGDI).

In the placement, Legend plans to sell 4 million shares.

The proceeds will be used for exploration on the company's northern Australian diamond properties acquired from Astro Diamond Mines N.L. The remainder will be used for working capital.

Based in Melbourne, Australia, Legend acquires and operates diamond interests in Australia.

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