Are "Toxic Financings" Slaying Small Retail Investors? Print E-mail
By Staff and Wire Reports   
Tuesday, 19 August 2014 04:32

Ironridge GlobalWhat do publicly traded biotech companies like Genetic Technologies (NASDAQ::GENE), Rosetta Genomics (NASDAQ::ROSG), MEI Pharma Inc(NASDAQ::MEIP), Advaxis, Inc.(NASDAQ::ADXS), Amarantus Bioscience (OTCMKTS:AMBS), Pressure Biosciences (OTCMKTS:PBIO), Uluru Inc. (OTCMKTS:ULUR), PositiveID Corporation (OTCMKTS:PSID), Cord Blood America Inc.(OTCMKTS:CBAI) and IntelliCell BioSciences, Inc. (OTCMKTS:SVFC) all have in common? 

At some point, they all took on less than favorable financings. It appears most of them survived (some barely) those ill-advised transactions. Yet others, like IntelliCell BioSciences are now to attempt a come-back from sub-penny levels. This after accepting the terms and being sent into a virtual "death spiral" by 'institutional investors."

Making headlines, and pursuant to a judge's orders, Intellicell BioSciences delivered to one particular investment fund 53,568,400 common shares of Intellicell having a value of $91,912.42- which was owed to the firm which had provided them an early financing.  The investment fund, Ironridge Global asked a judge to require IntelliCell to deliver all free-trading shares of common stock owed to Ironridge Global, in addition to full payment of all principal and interest owed under its Convertible Promissory Note.

The court also ordered that Ironridge's first-priority security interest over all assets of Intellicell would continue under its Security Agreement until IntelliCell fully complied with the court's orders. Ironridge Global had previously served a Notice of Foreclosure Sale on IntelliCell and its Chief Executive Officer, Dr. Steven Victor, for failing to timely pay its loan when due.

After an arduous battle in the courts the company had previously announced that Judicial Hearing Officer Ira Gammerman, a long time former Justice of the Supreme Court of the State of New York, in a decision on each of Ironridge's claims against the Company, fully justified IntelliCell's position by ruling against each of Ironridge's and TCA's demands for monetary damages. The Company has always maintained that Ironridge was not entitled to any monetary claims in this matter and Judge Gammerman agreed. The Court made it abundantly clear that Ironridge (led by its principals John Kirkland and Richard Krieger) and TCA are not entitled to monetary damages and had no right to inappropriately broadcast to the world that it could sell IntelliCell's assets.

Adding to the intrugue here, just days ago, an artcile by Seeking Alpha contributor Micheal Morhamus had called attention to the fact that many small cap companies succumb to toxic financings as a way to stay alive, which can include below-market pricing, warrants and adverse 'ratcheting' provisions.

Morhamus, who has exposed various schemes and companies in the past as a contributor at the popular investment news portal, dove in for a closer look at Ironridge Global IV, Ltd.

According to Morhamus, the Wall Street fund has entered into more than 50 equity financing transactions in the last three years, but most of those deals may have come at the expense of the small retail investors who were left “holding the bag,” despite best efforts by management teams of to keep their emerging small-cap companies funded and alive.

Morhamus points out that here are at many other institutional investment firms which are in the business of "coming to the rescue" of desperate small cap companies who have little choice but to take money however they can, under whatever predatory terms they agree to. He writes that while those firms and their terms may not be fair they are also not illegal.

In recent days, the U.S. Securities and Exchange Commission is rumored to be closing in on some of the more egregious offenders who may be manipulating prices in order to force more debt.

Previously IntelliCell's CEO, Dr. Steven Victor had stated: "We maintained from the very beginning that we would vigorously defend ourselves against all of John Kirkland's and Ironridge's claims for additional monetary damages and today the Company feels vindicated and is happy for its shareholders."

Unfortunately, says Morhamus, many of IntelliCell's early investors lost a small fortune along the way.

Reached for specific comments for the Seeking Alpha article, Dr. Victor said simply: "There are good guys in the space and there are bad guys in the space, like anything else."

Having survived, Dr. Victor says his regenerative medicine firm is now focused on making a comeback with a real technology and products that are all set to generate revenues.

"Anyone who wants to know what really happened and how much frustration the management team went through, can simply read through our filings. It's all there."

Other publicly traded companies, like Amarantus Biosciences, settled serious loan and financing debts by issuing Ironridge tens of millions of shares of common stock.

Retail biotech investors who want to learn more about what they can do to protect themselves from these types of scenarios can find  Morhamus’ complete article at Seeking Alpha.

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