WaferGen raises $3.57 million from new investor; Essential raises $1.75 million; Metal Storm to sell notes

By Kenneth Lim

Boston, May 19 - WaferGen Biosystems, Inc. said it kept its latest fundraising exercise at $3.57 million to be able to meet its cash requirements without diluting its equity base by too much.

Essential Innovations Technology Corp. announced a $1.75 million issue of convertible notes and said it is in talks for a larger equity capital raise.

Meanwhile, Metal Storm Ltd. said it is raising A$6 million from an offering of convertible notes and a rights issue to existing note holders.

WaferGen raises for development

WaferGen said it is selling $3.57 million worth of common stock in a private placement.

The deal involves 1.6 million common shares sold at $2.25 each, with 40% warrant coverage. The five-year warrants are exercisable at $3 each.

WaferGen common stock (OTCBB: WGBS) rose 1.92% or $0.05 to close at $2.65 on Monday.

Funds affiliated with Brencourt Advisors and other existing investors are taking part in the common stock placement.

WaferGen, a Fremont, Calif.-based developer of analytical instruments used in genetics-based research, said its private Malaysian subsidiary, WaferGen Biosystems (M) Sdn. Bhd., is also selling 444,444 redeemable convertible preferred shares to Malaysian Technology Development Corp. Sdn. Bhd. (MTDC) for $1 million. It will sell an additional $1 million in preferreds if certain milestones are achieved.

The convertible preferreds are exchangeable into such number of common shares at a conversion price of $2.25 per share.

WaferGen said it will use the proceeds of the stock financing to continue developing its proprietary SmartChip technology as well as to expand the marketing for its SmartSlide system.

"We are very pleased to announce these financings and to partner with both the MTDC and key U.S. institutional investors, to support and advance our product development and worldwide commercialization efforts at WaferGen," WaferGen chairman and chief executive Alnoor Shivji said in a statement.

"MTDC is a strong and experienced investor and partner in Malaysia and this new relationship will provide tremendous strategic advantage as we work to initiate our development and commercialization work for the SmartChip system in Malaysia. In the U.S., we are thrilled to have the new support of Brencourt Advisors, a successful and experienced group that will undoubtedly offer WaferGen critical guidance as we move the company through the development stage and toward broader commercialization."

The pricing of the common stock placement, at $2.25 per share, was at a premium to market when the deal was initially discussed, Shivji told Prospect News.

"Brencourt and their affiliated funds...they have a very good understanding of the space in terms of what it means to the industry," Shivji said.

"I think overall I'm pretty happy with the deal because, you know, when we actually started discussing this financing, the stock price was in fact below the $2.25. $2.25 was an excellent price which was above market when we had the discussions. That really tells you that they believed in the company. Especially in this market, it's rare to find investors who can do that. They clearly knew much about this company and what the company can present."

WaferGen needed the money to grow its products and business, Shivji said. The company reported cash, cash equivalents and marketable securities worth $3.2 million as at end-March, compared to $5.2 million as at end-2007, so it is still using up cash, he said.

"Actually we didn't have that much cash," Shivji said. "Because those results were at the end of the first quarter. If you take those results and you extrapolate, take into account our burn rate, we needed to raise cash."

But WaferGen kept its capital raising to a minimum so that if it achieves further milestones later, it will be able to raise more capital as needed at a better price, Shivji explained.

"We could have raised much more but we decided not to raise much more because we didn't want to do that," he said. "We want to achieve more milestones and those milestones need to be significant for us."

Raising further capital will also depend on those milestones, he said.

"We won't raise any time soon, probably," Shivji said. "We might once we achieve some specific milestones. Our next significant milestone will be our beta [testing for its SmartChip system]."

Essential raises $1.75 million, eyes more

Essential Innovations said it sold a $1.75 million fixed-price, interest-bearing convertible term note in a private deal.

Essential, a Bellingham, Wash.-based water treatment development company, said it will use the proceeds to pay down debt, buy raw materials, structure an interest escrow account to service the note, and for general working capital.

The company said in a statement that it is also looking to raise more money in an equity deal.

"This recent funding is truly representative of the high level of confidence that exists from the investment community in our technology, our people, our industry and our organization," Essential president and chief executive Jason McDiarmid said in a statement.

"The business relationships we have now solidified over this last year, most particularly in relation to the sales and distribution of our EI Elemental Geoexchange product line, provided us with the necessary validation of our overall business case to gain the on-going support of our lender as is clearly represented by this substantial investment.

"As negotiations in relation to a larger equity financing now continue forth with numerous parties both domestically and internationally, this recent $1.75 million investment has provided a wonderful catalyst to drive our business and to continue to prove to those in the capital markets and throughout the industry that we have positioned ourselves to be one of the true Geoexchange leaders in the world today."

Metal Storm to raise A$6 million

Metal Storm said it plans to raise A$6 million from a sale of convertible notes and rights.

The notes will be placed with Harmony Investment Fund Ltd. or its associates. Harmony is also the underwriter of the rights issue, which will be offered to existing note holders.

The company said it is also extending the maturity date on its existing convertible notes due Sept. 1, 2009 to a later date.

Metal Storm, a Brisbane, Australia-based defense technology company, said it will use the proceeds to pay additional interest on its existing convertible notes for the extended period, pay interest on the new notes and for working capital.

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