Private placements limited to smaller deals; DrugMax raises $17 million

By Sheri Kasprzak

Atlanta, Dec. 2 - Private placement volume in both the United States and Canada took a dive Thursday because of lower investor demand, according to some sources.

"I think we may start to see a lag in volume because of a drop in investor interest," said one sell-side source. "I had a feeling this might happen, but it seems to be happening earlier than I thought.

"There is some volume out there, but it has dropped off and the deals that are out there seem to be getting smaller. Issuers can't put together deals that investors aren't going to buy, but if they need money, they may try to do several smaller deals in order to raise it."

Another source said Thursday's lag in volume might just be temporary.

"I think it may improve," the source said. "Some companies are just finishing up their third-quarter earnings, so that may have something to do with it. And at any rate, in this market, the high volume can't last forever. If anything, the last month or so was a rarity."

The same scenario seems to be true in Canada, where volume sagged a little Thursday.

"Volume is definitely down from earlier in the week," said one Canadian sell-sider. "It's still not bad, but there are a variety of factors pushing the market. Oil, obviously, is down. That dragged down energy stocks and those issuers are making up a lot of the Canadian market these days."

Oil closed down $2.24 at $43.25 per barrel Thursday.

Heading up action in the United States, DrugMax Inc. said it wrapped up a private placement of convertible preferred stock for $17 million

The preferreds are convertible into 4,594,591 common shares at $3.70 each.

First Albany Capital Corp. was the lead placement agent in the deal.

"Our new equity financing marks a significant milestone for DrugMax, as it validates our new business model and will allow us to build an integrated specialty pharmacy distribution platform," said Ed Mercadante, DrugMax's co-chairman and chief executive officer in a statement. "With the support of our shareholders, we will grow our position as the leading operator of on-site pharmacies at medical centers, health clinics and other strategic locations throughout the U.S."

Farmington, Conn.-based DrugMax is a pharmaceutical distribution company. It plans to use the proceeds from the financing for general working capital purposes, growth and development.

On Thursday, the company's stock closed down $0.01 at $3.47.

Digital Lifestyles wraps financing

Digital Lifestyles Group Inc. said Thursday it raised $7.5 million through the private placement of a convertible revolving note and a convertible term note.

Laurus Master Fund Ltd. bought the notes.

The balance of the $4.75 million revolving note and the principal of the $2.75 million term note are convertible into common shares at $0.39 each.

Each of the notes matures Nov. 29, 2007 and bears interest at Prime plus 200 basis points.

Laurus also received warrants in the deal for up to 3,846,154 shares at $0.44 each.

"We are pleased to enter into this relationship with Laurus Funds," said chief financial officer Ted Muftic in a statement. "The completion of this funding, following our recently completed equity offering, will provide us with enhanced financial flexibility to increase our working capital and fund the next growth phase of our hip-e line of products and services."

Based in Austin, Digital designs, manufacture and markets digital software, personal computers, accessories and entertainment and communications products. In September it sold $5 million of stock in a PIPE offering via agent Tejas Securities.

Digital Lifestyle's stock closed up $0.01 at $0.39 Thursday.

Canadian offerings

Leading deals north of the border, Mart Resources said Thursday it upsized a previously announced private placement to C$7.875 million.

In the amended offering, the company will issue 17.5 million shares at C$0.45 each.

The deal was originally announced Oct. 21 as a C$6.3 million offering of 14 million shares at C$0.45 each.

"The deal looks like it's pretty much in line for them," said one source familiar with the offering. "It seems to be right in line with where they've been trading. It looks like a good deal for them."

On Thursday, Mart's stock closed up C$0.05 at C$0.49.

Mart, based in Calgary, Alta., is an oil, gas and power company with projects based mainly in Africa. The proceeds from its private placement will be used to contract a service rig for testing and for activities in the company's Nigerian oil and gas fields.

Trade Winds closes deal

Precious metals exploration company Trade Winds Ventures Inc. wrapped a private placement for C$3,094,449.

The company issued 805,000 non flow-through units at C$1.25 each and 1,491,571 flow-through units at C$1.40 each.

The non flow-through units include one non flow-through common share and one half-share warrant. The whole non flow-through warrants allow for an additional share at C$1.50 each for the first year and C$1.75 for the second.

The flow-through units consist of one flow-through common share and one half-share warrant. The whole warrants allow for an additional share at C$2 each for one year.

Pacific International Securities Inc. was the placement agent in the offering.

Trade Winds is based in Vancouver, B.C. and plans to use the proceeds from the flow-through units for exploration and development project costs on its Detour Lake and Birch Lake properties in Ontario. The common share units will be used for exploration and development project costs on various projects, with the remaining funds being used for property acquisition costs, investments and working capital.

Trade Winds' stock closed down C$0.04 at C$1.20 Thursday.

Result's C$2.01 million offering

Result Energy Inc. plans to raise up to C$2.01 million in a private placement.

The offering includes up to 3.35 million units at C$0.60 each. The units are comprised of one flow-through share and one half-share warrant.

The whole warrants allow for an additional share at C$0.65 through Dec. 31, 2005.

The offering is being placed through a syndicate of underwriters led by Acumen Capital Finance Partners Ltd.

Result is a Calgary, Alta.-based oil and gas exploration and development company. It plans to use the proceeds from the financing for exploration, development and general corporate purposes.

The company's stock closed down C$0.03 at C$0.51 Thursday.

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