MDwerks raises $7.5 million; Raptor, National Holdings sell to funds; Generex sells convertibles

By Kenneth Lim

Boston, April 2 - MDwerks Inc. said it raised $7.5 million from a single investor as it continues to pursue its growth plans.

Meanwhile, Raptor Networks Technology Inc. closed a $3.13 million private placement that saw the involvement of two major funds.

National Holdings Corp. also completed a private sale of convertibles and warrants to a mezzanine investment fund.

Generex Biotechnology Corp. announced a $20.65 million placement of convertible notes and warrants to fund the development of its late-stage drug.

MDwerks raises for growth

MDwerks said it raised $7.5 million in a private placement of convertible preferred shares and one warrant.

The company sold 750 series B 12% convertible preferred shares at $10,000 per preferred share to Vicis Capital. The preferred stock is convertible into 13,333,334 common shares, representing a conversion price of about $0.5625 per common share.

The conversion price was a discount to MDwerks common stock (MDWK), which fell $0.05 or 5.88% to close at $0.80 on Wednesday.

Each preferred share is redeemable at par, at the holder's option, on March 31, 2010.

Vicis also received a 10-year series H warrant to buy 53,333,334 common shares, which is exercisable at $0.75.

MDwerks, a Deerfield Beach, Fla.-based provider of insurance claims software for the health care industry, said it will use the proceeds for working capital and to service existing debt.

"We are very pleased to consummate this transaction and are gratified by the confidence our investors have placed in the future of MDwerks," MDwerks chief executive Howard Katz said in a news release. "We believe this financing will help accelerate our business plan and put the company in a strong position to support the next phase of its growth."

Raptor investors add to holdings

Raptor Networks said it placed $3.13 million of 10% convertible senior secured notes due March 31, 2010 to two existing investors.

The notes are convertible into common shares at $1 per share, or an initial conversion premium of about 23.46% based on the company's Tuesday closing stock price of $0.81. Raptor common stock (RPTN) closed at $0.78 on Wednesday, down by 3.7% or $0.03.

The investors also received nine-year warrants for 6.25 million shares, exercisable at $1 per share, and 3.125 million common shares.

The investors were Castlerigg Master Investments Ltd., which took $2.125 million of the notes, and affiliates of Cedar Hill Partners, which took $1 million of the notes.

Santa Ana, Calif.-based Raptor, a developer of network switching architectures, said it will use the proceeds for its business operations.

"We believe this most recent round funding from our existing institutional investors reflects their continued confidence in Raptor's superior technology, products, and business outlook," Raptor chief executive Thomas M. Wittenschlaeger said in a statement. "We plan to use this funding to advance our business operations to achieve sustainability across multiple sales verticals."

National Holdings places to St. Cloud

National Holdings Corp. said it placed a convertible and a warrant to St. Cloud Capital Partners II LP for $3 million.

The 10% convertible senior subordinated promissory note due 2012 is initially convertible into 1.5 million common shares, or an initial conversion price of $2 per share. National Holding common stock (OTC BB: NHLD) closed at $2.25 on Wednesday, up by $0.05 or 2.27%.

The five-year warrant may be exercised for 375,000 common shares at $2.50 per share.

The convertible may be called in the second year for 125% of the principal, in the third year for 145% of the principal, and in the final year for 165% of the principal.

New York-based National Holdings is a financial services and insurance holding company for National Securities Corp., National Insurance Corp. and National Holdings Mortgage Corp. It did not say how it will use the proceeds.

St. Cloud is a Los Angeles-based private mezzanine investment fund that invests in debt and equity securities of lower middle market companies. Marshall S. Geller, co-founder and senior managing partner of St. Cloud, is a member of National Holdings' board of directors.

"This is a very opportunistic time for National," National Holdings chairman and chief executive Mark Goldwasser said in a news release. "Current market conditions have created unique situations to acquire brokers, brokerage revenues and assets. This capital should further enable us to continue the trend as one of the fastest growing independent contractor firms in the U.S."

Generex arranges placement

Generex said it is selling $20.65 million of 18-month convertible secured notes and warrants in a deal run by Rodman & Renshaw LLC.

The notes have an 8% coupon. They are convertible into common shares at any time with an initial conversion price of $1.21, a 10% premium to the common stock's March 31 closing price. Generex common stock (Nasdaq: GNBT) closed at $1 on Wednesday, lower by $0.04 or 3.85%.

Investors also will receive series A and A-1 warrants, series B warrants and series C warrants.

The series A and A-1 warrants are exercisable for seven years. The series A warrants are exercisable into 5,257,729 shares and the series A-1 warrants are exercisable into 751,857 shares.

The series B warrants are not exercisable until six months and one day after the closing date. After that period, they will remain exercisable for 18 months after a registration statement with the Securities and Exchange Commission for the underlying shares for the notes and warrants takes effect. They are exercisable into 17,066,166 shares.

The series C warrants also are not exercisable until six months and one day after the closing date. After that period, they will remain exercisable for seven years. They are exercisable into 12,799,586 shares.

All of the warrants are exercisable at $1.21.

Toronto-based Generex, which develops drug delivery systems, said it will use the proceeds for working capital, including pursuing phase 3 clinical trials of its Generex Oral-lyn oral insulin treatment.

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