Echo Therapeutics Inc. (OTCBB:ECTE) wrapped up its latest fund-raising effort this week, tapping into the old-money network in and around the City of Brotherly Love.
The Franklin, Mass.-based device manufacturer went to the city where Ben Franklin made his mark and pulled in an additional $562,000, after hiring a Philadelphia investment bank to proffer 470,000 shares of its stock. Last month, Echo banked $3 million in new funding, although securities documents filed at the time indicated they hoped to raise nearly $600,000 more before bringing down the curtain on the deal.
They found friends in Pennsylvania. Among the new investors willing to shell out $1.25 a share were I. Wistar and Martha Morris, co-trustees of the Cotswold Foundation, known for its philanthropic work in Philadelphia and near their summer home on the Maine coast. Through investment vehicles such as Eleventh Generation L.P., Wistar Morris has been a director at more than a dozen companies and is also a director at Boenning & Scattergood, the placement agent hired to shop Echo Therapeutics stock.
For that work, Boenning & Scattergood received 7 percent of gross proceeds and “cashless” warrants to acquire up to 47,000 Echo shares over the next five years. Under cashless exercises, brokers are allowed to sell stock to cover the cost of exercising the warrants, giving those proceeds to the company and pocketing any difference above the exercise price.
Echo, which is developing a wireless blood glucose monitor for diabetics, will use the bulk of the new funds for Food & Drug Administration registration, product development and manufacturing. A portion of the new money also will redeem some of the preferred stock issued to a New York-based private equity fund in exchange for converting a $2 million loan into equity earlier this summer.
According to documents filed Dec. 2, a trio of investors riding cash-outs from at least one dot-com company shortly before the boom crashed also bought into Echo Therapeutics. All three had stakes in LaserLink.net, a privately held Internet service provider in Media, Pa., that sold to Covad Communications for $387 million in March, 2000.
Boenning & Scattergood COO John Chuff also participated in the recent Echo deal, along with Downsview Capital, a private equity firm in Northbrook, Ill., that’s long been an aggressive buyer in the PIPE (private investment in public equity) market.