Private placement volume hits a slump; Drugstore.com raises $26 million

By Sheri Kasprzak

Atlanta, March 2 - As stocks took a hit Wednesday, private placement volume also took a dip.

The Dow Jones Industrial Average closed down 18.03 at 10,811.97; the Nasdaq composite index ended the day down 3.75 at 2,067.50 and the S&P 500 edged down 0.33 to close at 1,210.08.

"Oil really pushed stocks down today and volume kind of went down with it," said one sell-sider. "There were a few smaller things out there today, but not a lot to really talk about."

Oil closed up $1.37 at $53.05 per barrel Wednesday.

Heading up private placement action was a $26 million offering from Drugstore.com, Inc.

The company said it sold 10 million shares at $2.60 each to a single institutional investor.

"As we highlighted during our fourth-quarter earnings call, 2005 will be an investment year - in our brand, in marketing and in technology - which we believe will create an even stronger, profitable company," said the company's chief financial officer, Bob Barton, in a statement. "This financing will help us make these investments while further strengthening our balance sheet."

Based in Bellevue, Wash., Drugstore.com is an online provider of health, beauty, vision and pharmacy products. The proceeds will be used for general corporate purposes, including investments in marketing and technology.

Drugstore.com's stock closed down $0.14 at $2.15 on Wednesday.

Virtra Systems gets equity line

Virtra Systems Inc. received an equity line for up to $6 million from Dutchess Private Equities Fund II, LP.

The company may sell stock to Dutchess at a price equal to 94% of the lowest closing bid during the five days before notice.

The number of shares the company is permitted to put under the agreement is either 200% of the average daily volume of stock for 10 trading days before notice multiplied by the average of the three daily closing bid prices immediately before the put date or $50,000. The maximum single put is $1 million.

Separately, Dutchess bought $750,000 in debentures with 8% interest and a three-year maturity. The debentures are convertible into common shares at the lesser of 80% of the lowest closing bid price during the 15 trading days before conversion or $0.33.

For the initial $500,000 received from the debentures, the investor received warrants for 500,000 shares at $0.33 each for five years. When the remaining $250,000 is received, the investor will receive warrants for 250,000 shares at $0.33 each for five years.

"After discussions with numerous funds and financiers, we again selected Dutchess as our financing partner," said L. Kelly Jones, Virtra's chief executive officer, in a statement. "We believe we have secured a growth funding under the most favorable currently available terms. The most attractive feature of this financing is our ability to draw upon this equity line at our discretion.

"As we become increasingly self-sufficient financially through sales of our IVR training simulators and Immersa-Domes, having readily available capital, if needed, will assist our ability to fund contracts and meet our customers' requirements and delivery expectations."

Based in Arlington, Texas, Virtra Systems makes virtual realty systems for military and law enforcement training.

On Wednesday, the company's stock closed up $0.02 at $0.34.

Veridicom raises $1.7 million

Veridicom International Inc. closed a $1.7 million portion of a$5.1 million private placement Wednesday.

The company sold convertible secured notes to accredited investors.

The notes mature in 36 months, bear interest at 10% annually and are convertible into common shares at the lesser of $0.635 or 50% multiplied by the average of the average daily prices of the company's shares five days before conversion.

The investors also received warrants for 10.2 million shares. Some of the warrants are series A warrants exercisable at $3 each and some of the warrants are series B warrants exercisable at $5 each. Both warrants expire in five years.

"We expect that the remaining milestones will be met in a timely fashion and are delighted to have this validation from the institutional community," said Paul Mann, the company's president and chief executive officer, in a statement.

"Over the last few months, we have made significant progress with our sales efforts to key industries, such as financial, retail, medical and travel sectors. With these additional funds, we will now be able to accelerate our deployment of these programs."

The placement agent in the deal was Joseph Stevens & Co. Inc.

Based in Seattle, Veridicom is a hardware and software company that focused on public key infrastructure, secure token-based technology and fingerprint biometrics to authenticate and manage personal identities.

On Wednesday, the company's stock closed down $0.20 at $1.80.

Point's stock rises

Point Therapeutics, Inc.'s stock rose Wednesday, a day after the company announced its plans to raise $16,425,000 in a direct placement.

The company's stock closed up $0.17 at $4.82 and up $0.02 in after-hours trading.

On Tuesday, when the deal was first announced, Point's stock closed down $0.65 at $4.65.

The company plans to sell stock at $4.50 per share.

Based in Boston, Point Therapeutics is a biopharmaceutical company focused on developing treatments for cancers, diabetes and other diseases.

On Tuesday, the company's stock closed down $0.65 at $4.65.

NationsHealth's stock drops

A day after closing a $15 million private placement of convertible promissory notes, NationsHealth's stock took a dip Wednesday.

The company's shares closed down $0.10 at $5.45 on Wednesday.

On Tuesday, when the deal wrapped, the company's stock ended up $0.11 at $5.55.

"Well, this company has been having some pretty serious problems," said one market source on NationsHealth's stock losses Wednesday. "They had some losses for both the fourth quarter and year, so I think they had gotten a boost from the private placement, which they obviously need for capital infusion, but now they're just settling back to where they really had been before."

The notes are convertible into common shares at $6.56 each.

Based in Sunrise, Fla., NationsHealth provides medical products and prescription discount services.

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