Local.com seals $12.96 million stock sale; Electro-Optical pockets $11.5 million

By Sheri Kasprzak

New York, Aug. 1 - For the second straight session, PIPE activity gained momentum after a particularly sluggish summer.

"I think even for summer, it's been pretty busy," said one sellside market source of the session's activity. "All things considered, we've done quite a bit. If there haven't been a lot of deals, there have been several really big ones [this summer]."

Another sellsider agreed.

"It's not that bad," he noted. "You get a slowdown from time to time; that's pretty typical, but it's been a fairly good year. Investors are still interested, if you ask me. I don't think it has anything to do with a lack of investor interest in these deals."

Heading up the slate of deals on Wednesday was a $12,962,950 offering of stock from Local.com Corp.

News of the deal, released early Wednesday, sent the company's stock retreating early in the session, giving up 14.43%, or 99 cents, by 11:42 a.m. ET. By the end of the session, the stock had fallen by 12.39%, or 85 cents, to close at $6.01 (Nasdaq: LOCM). In after-hours trading, the stock had gained 2 cents.

Of the drop in stock, one sellside market source who saw the deal said he felt the discount was "appalling."

"They might as well have handed it over for free," he said.

Two institutional investors bought 2,356,900 shares at $5.50 each, a 19.8% discount to the company's $6.86 closing stock price from Tuesday.

The investors also received warrants for 471,386 shares, exercisable at $7.89 each for five years, and warrants for 471,386 shares, exercisable at $9.26 each for six years. Both sets of warrants become exercisable on Feb. 1, 2008.

Proceeds will be used for acquisitions, the expansion of direct sales channel development, for the protection of the company's intellectual property portfolio and for working capital.

Based in Irvine, Calif., Local.com is a local search engine.

Electro-Optical raises $11.5 million

Moving to the biotech sector, Electro-Optical Sciences, Inc. completed a private placement for $11,501,023.

Electro-Optical issued 2,000,178 shares at $5.75 each.

The investors also received warrants for 500,041 shares, exercisable at $8.00 each for five years.

Cowen and Co., LLC was the lead placement agent on the deal.

The company's stock gained 16 cents, or 2.45%, on Wednesday to close at $6.69 (Nasdaq: MELA). The stock gained a penny in after-hours trading.

Irvington, N.Y.-based Electro-Optical develops medical devices used to detect melanoma.

Chad settles PIPE

In other biotech news, Chad Therapeutics, Inc. penned a $3.5 million deal that included $750,000 of convertible term notes and a $2.75 million revolving credit line.

The 33-month convertible notes are due in equal monthly installments and bear interest at Prime rate plus 200 basis points. The notes are convertible into common shares at $1.18 each.

The credit line also has a 33-month term and bears interest at Prime rate plus 150 bps.

The investors will receive warrants for 976,744 shares, exercisable at $1.24 each.

Proceeds will be used for the development and rollout of the company's initial products for sleep disorders. The rest will be used for working capital.

"As previously announced, we are currently launching several new products for the oxygen market and expect to launch our initial products for the sleep disorder market this fall," said Earl Yager, Chad's chief executive officer, in a news release.

"We also are pursuing outsourcing and other cost-cutting measures to reduce manufacturing costs for many of our established products. We believe this financing package gives us the resources to complete these programs while maintaining our current operations."

Chad's stock got off to a good start, gaining 9.83% by 11:24 a.m. ET. The stock went on to gain 5.1 cents, or 5.13%, to close at $1.406 (Amex: CTU).

Located in Chatsworth, Calif., Chad develops, manufactures and markets respiratory care devices.

Raptor closes $3.5 million deal

Moving to the tech sector, Raptor Networks Technology, Inc. sealed a $3.5 million offering of senior secured convertible notes.

Although the full terms of the notes were unavailable by press time Wednesday, the notes are convertible into common shares at $1.2029 each.

Proceeds will be used for the company's business plan.

"We believe this funding from our existing institutional investor base clearly reflects their confidence in Raptor's technology, products and business outlook," said CEO Tom Wittenschlaeger in a news release.

"We plan to use this funding to advance our business plan to achieve sustainability across multiple verticals."

Raptor's stock fell by 6 cents, or 5.13%, on Wednesday to close at $1.11 (OTCBB: RPTN).

With headquarters in Santa Ana, Calif., Raptor Networks develops network switching architectures.

Orthovita stock settles down

In secondary market activity, Orthovita, Inc.'s stock fell after the company closed a $32,517,054 private placement of stock.

The stock gave up 8 cents, or 2.46%, to close at $3.17 (Nasdaq: VITA). In after-hours trading, the stock fell by 2 cents.

On Tuesday, when the deal closed, the stock climbed by 8 cents to end at $3.25.

In the placement, the company sold 12,317,066 shares at $2.64 each to Essex Woodland Health Ventures Fund VII, LP; Lehman Brothers Inc.; Magnetar Capital Master Fund, Ltd.; W.H.I. Growth Fund Q.P., LP; WHI Select Fund, LP; Panacea Fund, LLC; and Stephen F. Wiggins.

Those same investors also bought $25 million in 10% notes with warrants for 1,466,276 shares.

The investors may buy up to $20 million in additional notes.

Orthovita, based in Malvern, Pa., develops synthetic biomaterials used in spinal surgery.

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