Dimethaid seen running out of money
The Globe and Mail
LEONARD ZEHR
Beleaguered drug maker Dimethaid Research Inc. has warned that its private sale of $4.2-million of special warrants earlier this month will keep the company going only until about Aug. 31.
The Markham, Ont.-based company, which is fighting a proxy battle from dissident shareholders, made the disclosure in the prospectus for its sale of 7.28 million special warrants at a price of 58 cents each.
On the Toronto Stock Exchange yesterday, Dimethaid slumped to a new 52-week low of 43 cents before closing at 44 cents, down 2 cents.
The stock price has been tumbling since the beginning of April, reflecting an attack by short sellers, who profit from a decline in the price of a stock. Between March 31 and June 15, the short position of Dimethaid soared to nearly 3.4 million shares from 171,400 shares on the TSX.
Short sellers have targeted the financially strapped company on expectations that it would be forced into a highly dilutive financing
The special warrant issue represents about 22 per cent of the 25-per-cent dilution allowed by the TSX for private placements without approval of shareholders.
As a result, Dimethaid said it would not be allowed to undertake a similar financing until six months from June 10, 2004.
Dimethaid has set Sept. 21 for its annual meeting to vote on the proxy challenge and so that "any approvals for financing could be sought, if required.
Additional shareholder meetings could be scheduled earlier, if required."
Dimethaid said that to its knowledge, the dissidents own 5.25 million shares or a 6.9-per-cent stake.
In outlining its debt obligations, the company said a $2-million loan, which has been fully drawn down and is secured by a mortgage on its head office building, is due to be repaid on Sept. 30, 2004.
"There can be no assurance that Dimethaid will be able to repay this amount or refinance it on favourable terms," it said.
Dimethaid also is required to pay the owners of Oxo Chemie AG $9.4-million (U.S.) on Nov. 30, 2004, as part of an earlier acquisition accord. In an earlier repayment, Dimethaid issued new stock to Oxo's owners.
"The company will not be able to satisfy the obligations under the Oxo Chemie purchase agreement on Nov. 30, 2004, by issuing common shares without TSX and shareholder approval," it added.
Dimethaid also has monthly repayments to satisfy a loan from Investissement Québec and a settlement with a former British distributor of its Pennsaid topical lotion for pain from osteoarthritis. |
