Commtouch raises $3 million in stock deal; mixed stocks, rising oil prices impact PIPE issuance

By Sheri Kasprzak

New York, Oct. 11 - Commtouch Software Ltd. led private placement news with the completion of its $3 million private placement of stock Tuesday.

The Netanya, Israel-based anti-virus software producer issued 6 million shares at $0.50 each to a group of investors led by Aviv Raiz. As of Oct. 11, the issuer had 53,010,318 outstanding common shares.

The investors received two sets of warrants in the deal. The first allows for up to 1.5 million shares at $0.50 each for nine months and the second allows for up to 1.5 million shares at $0.65 each for five years.

The proceeds from the offering will be used to bring Commtouch into compliance with Nasdaq listing requirements. On Oct. 6, the company received notice from Nasdaq that it was in violation of Nasdaq rule regarding minimum shareholder equity-listing requirements.

The cash boost also boosted Commtouch's stock, pushing it up 13.19%, or $0.07, to close at $0.60.

Raiz said, in a statement, of his investment, "Commtouch operates in an important and growing sector, and I have no doubt that its unique, proprietary technology, in conjunction with its business model, will result in a growing and profitable company."

Even though the company is not currently turning a profit, its net loss for the quarter ended June 30, 2005 was improved over the corresponding quarter of 2004. For the quarter ended June 30, 2005, Commtouch reported a net loss of $737,000, compared to $1,194,000 for the same quarter in 2004.

"On the heels of a record quarter and as the company continues opening doors to new business, we believed it important to increase working capital as a show of additional business stability and commitment of investors, both old and new," said Gideon Mantel, Commtouch's chief executive officer, in a statement.

"This financing, coupled with continued improvement in financial results, should allow us to meet Nasdaq's minimum shareholder equity listing requirement into the foreseeable future. It is our intention to earmark a portion of the financing proceeds towards a more aggressive campaign bringing greater visibility to the unique advantages of our anti-spam and Zero-Hour virus protection products."

In the broader market, it may have been back to business as usual Tuesday after the Columbus Day holiday, but sell-siders said rising oil prices and a mixed stock market looked to have kept some issuers at bay.

"Seeing a couple of things," said one market source of why volume was a bit lower than usual Tuesday. "Stocks [are] mixed. Oil up again. Could be keeping some [issuers] away."

In fact, oil prices gained $1.25 Tuesday to end at $63.05 per barrel after suffering a steady decline last week.

As to stocks, the Dow Jones Industrial Average was the only of the three major indexes to make gains on Tuesday, advancing 14.41 to close at 10,253.17. The Nasdaq composite index lost 17.83 to end at 2,061.09 and the Standard & Poor's 500 composite index gave up 2.46 to close at 1,184.87.

Quarterly earnings reports have also had an impact on issuance, according to another market source.

"There are so many factors influencing earnings right now, considering all of the disaster-related crunches some [companies] are feeling," he said. "Investors take those things into consideration and this very well may be a turning point for the market in some ways. There has been a pretty good window for investments, but it may be falling."

ZBB's $5 million stock deal

Looking elsewhere in the private placement market, Australia's ZBB Energy Corp. is preparing to complete a $5 million stock deal with Wharton Equity Partners, LLC and Wharton Energy Partners I, LLC.

Under the terms of the agreement, Wharton will buy up to 6,666,667 shares at $0.75 each.

For every four shares purchased, Wharton will receive options for one additional share.

The offering is being conducted as part of ZBB's plan to buy 12% of the outstanding preferred stock of Idea One, Inc. from Wharton for 6,535,333 common shares at a price equal to $0.75 - or A$0.50 each.

Based in Kardinya, Western Australia, ZBB develops energy storage technologies.

The company's stock remained unmoved Tuesday at A$0.38.

Western Prospector leads Canadian offerings

Heading up light PIPE activity in Canada Tuesday was a C$20.8 million deal from Western Prospector Group Ltd.

The company plans to sell, through a syndicate of underwriters led by National Bank Financial and Haywood Securities Inc., 4 million shares at C$5.20 each.

The syndicate has an over-allotment option for up to 500,000 shares.

Proceeds will be used to accelerate exploration on the Saddle Hills uranium project in Mongolia. The rest will be used for other development costs at the project site.

Based in Vancouver, B.C., Western Prospector is a uranium exploration company.

The company's stock closed unchanged at C$5.60 Tuesday.

Rutter prices C$6 million offering

Elsewhere in Canadian offerings, Rutter Inc. priced a C$6 million offering from Rutter Inc. MGI Securities Inc. is the placement agent for the offering, in which Rutter hopes to sell up to 7,058,823 shares at C$0.85 each.

The proceeds will be used to produce more voyage data recorders to meet demand.

"The corresponding increase in receivables and inventories as a result of sales growth have resulted in additional strain on the working capital position of the company," said Donald Clarke, Rutter's chairman and chief executive officer, in a statement.

"This capital injection will shore up our balance sheet, providing us with the flexibility we need to not only bridge the lag between business and revenue growth, but to pursue additional strategic opportunities that we have always viewed as essential to increasing shareholder value over the longer term."

According to the statement from Rutter, the company's working capital had been drained by a lingering contract dispute in the engineering segment of the company and delays in the implementation of regulations requiring cargo vessels to carry voyage data recorders.

After the offering was announced early Tuesday, Rutter's stock gave up C$0.12, or 11.76%, to end at C$0.90.

Rutter, based in St. John's, Newfoundland, makes automation and control systems used in aircraft and ships.

Capstone's stock makes slight gains

A day after announcing the imminent closing of a $54 million direct placement, Capstone Turbine Corp.'s stock advanced just a touch.

The company's stock gained $0.04 on Tuesday to end the day at $2.73 before losing $0.02 in after-hours trading.

When the offering was announced Monday, Capstone's stock dropped 17.74%, or $0.58, to close at $2.69.

Under the terms of the direct offering, Capstone plans to sell shares to two institutions on each of 10 trading days after Oct. 7 at 96% of the volume weighted average price. The investors will fund $10 million initially and Capstone may require investors to buy $7.5 million in shares thereafter.

Based in Chatsworth, Calif., Capstone Turbine produces low-emission microturbine systems.

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