Auction Floor sells $1.5 million of units; VeriChip raises $8 million; Cell Therapeutics sells convertibles

By Kenneth Lim

Boston, March 4 - Auction Floor Inc. said it raised $1.5 million in a private placement of stock-and-warrant units as it prepares for an over-the-counter listing.

Meanwhile, VeriChip Corp. announced an $8 million debt financing deal that will allow it to pay down existing debt and to fund working capital.

Cell Therapeutics Inc. priced $51.66 million of four-year, 9% convertible senior notes in a direct placement that will be used to fund general purposes.

Auction Floor completes $1.5 million deal

Auction Floor said it sold $1.5 million of stock-and-warrant units in a private placement as the company prepares to seek an over-the-counter listing.

As part of the deal, which was placed by American Capital Partners, Auction Floor will also execute a 1-for-25 reverse split of its common and preferred stock.

Sources close to the deal said each unit is comprised of one share and one half-share warrant. The pricing of the units will be set at a 50% discount to the ex-split value of each share, with a floor price of $0.55. Each full warrant will be exercisable at the ex-split value of the common stock and may be called if the common stock trades above three times the strike price.

Auction Floor common stock (Pink Sheets: AFLR) closed at $0.03 on Tuesday, down by 1 cent.

Based in Scottsdale, Ariz., Auction Floor operates an online bidding platform for auction houses, charities and direct consignors.

"The investors were a group of high net-worth, experienced investors in the micro cap space who have done well in their past investments," Auction Floor spokesman Jeff Forster said.

Forster said the company's ability to place $1.5 million worth of stock through an investment bank was encouraging.

"In today's marketplace, with the flight to secure investments, with the stock market fluctuating the way it is, it gives a lot of validation to the management that the bank was able to close $1.5 million for a Pink Sheet company," Forster said. "When you see a Pink Sheet company with a real bank representing them and closing such an amount of money, that itself is the news."

The reverse stock split was a necessary step to strengthen the company's capital structure and assure investors as it prepares to list over the counter, Forster said.

"American Capital Partners was very, very professional," he said. "The bank wanted us to do the reverse split, to make sure that the investors are protected."

"The company is taking some tough medicine now," he added. "The company felt that if we do that now it will help them get where they want to go. If you want the investors in the world to take the company serious, if you want to acquire other companies, for example, they will have a good platform to do that."

VeriChip gets $8 million loan

VeriChip said it took an $8 million loan from Valens Offshore II Corp., a specialist New York-based fund.

VeriChip said the non-convertible term loan matures in 13 months and bears interest at 12% per year. Valens, which specializes in small and micro-cap companies, will also receive 120,000 shares of VeriChip as consideration for the financing.

VeriChip common stock (Nasdaq: CHIP) finished at $2.50 on Tuesday, unchanged from its previous close.

VeriChip, a Delray Beach, Fla.-based maker of radio frequency identification systems, said it will use $5.3 million of the proceeds to prepay debt owed to Digital Angel Corp. The rest will be used for working capital.

"As a result of this prepayment, the company will not be obligated to make any further debt service payments to Digital Angel until September 2009," VeriChip said in a press release. "By eliminating all 2008 debt service payments, the financing will result in an increase of more than $3.6 million to working capital for the company in 2008."

Scott R. Silverman, chairman and chief executive of VeriChip, said in the release, "This new financing not only enables us to eliminate more than $5 million in debt owed to Digital Angel, but also provides us sufficient working capital to fund our business plan, which includes a new consumer marketing initiative, through early 2009."

Cell Therapeutics sells convertibles

Cell Therapeutics said it sold $51.66 million of four-year convertible senior notes at par to yield 9% with an initial conversion premium of 10% over its Monday closing common stock price of $1.28.

The initial conversion price on the convertibles is $1.41 per share. Cell Therapeutics common stock (Nasdaq: CTIC) closed at $0.74 on Tuesday, down by $0.55, or 42.64%.

Rodman & Renshaw, LLC was the agent for the direct placement.

Cell Therapeutics, a Seattle-based developer of cancer treatments, said the proceeds of the deal will be used for general purposes. It also announced that a "substantial number" of holders of its series A, series B and series C 3% convertible preferred stock and series D 7% convertible preferred stock have converted their preferred shares into common stock, leaving $13.1 million of the preferreds outstanding.

The company paid a total of $16.2 million in cash to the holders to induce the conversions, according to a news release.

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