Markets

Reverse Merger Bridges Israel, U.S. Biomed Companies

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A typical reverse merger involves an operational private company and a public shell with no ongoing business, but a deal involving Tarrytown, N.Y.-based EpiCept Corp. (EPCT) and Israel's privately held Immune Pharmaceuticals Ltd. will combine two viable biotech companies -- and their pipelines. The pair will combine in a share exchange transaction that will leave Immune Pharma's shareholders with 77.5% of the outstanding shares in newly formed Immune Pharmaceuticals Inc. The company will focus on treatments for inflammatory diseases and cancer. The EpiCept deal is also unusual as a reverse merger in that the newly formed company will meld the management of both, while most reverse mergers culminate with the resignation of shell management. Immune Pharma's CEO and founder Daniel Teper will replace EpiCept's interim CEO, Robert Cook, who will become the new CFO.

Legal
FSPI

First Surgical Sues over Ill-advised Reverse Merger

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First Surgical Partners (FSPI) says going public through a reverse merger was a costly mistake. The company is planning on going private, and it is suing the financial advisor that structured a going public transaction. Bellaire, Texas-based First Surgical, an operator of two surgery centers and a hospital in the Houston area, filed a lawsuit claiming that in 2010 Nobis Capital Advisors and its principals approached the company with what proved to be an unrealistic plan for going public. One of Nobis' principals, the suit alleges, is being sued by regulators for alleged market manipulation involving reverse mergers. First Surgical alleges that Nobis "abandoned" the company after receiving $3 million in fees and a substantial equity position in return for devising a deal that left First Surgical with an unexpected $4.5 million tax liability and major healthcare compliance issues that made expansion and recruiting impossible.

Markets
Orion Financial Group

Orion Financial Takes Itself Public with Self-filing

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A self-underwritten public offering is a dicey move that may not give the issuer much immediate capital market visibility, but a self-filed offering from Orion Financial Group is part of a plan to fund a consulting operation dedicated providing exactly that visibility. Orion is seeking to raise as much as $4 million to run a strategic consulting business serving companies with revenues from $2.5 million to $100 million. Orion, which was incorporated in Wyoming this spring, "provides financing alternatives to executives that seek to purchase (buy-side), divest (sell-side), or recapitalize their public or private company," a regulatory filing says. Self-underwritten offerings are cheap compared to underwritten offerings, whose cost comes with institutional support. After the dot-com implosion and related scandals involving misleading research coverage of "hot" IPO companies, many market players questioned the value of underwritten IPOs.

Legal
Virginia Sourlis

Reverse Merger Attorney Sourlis Convicted in SEC Securities Fraud Case

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A U.S. District Court found securities attorney Virginia Sourlis liable for fraud in the improper issuance of some six million shares of Greenstone Holdings stock. The court granted the part of a summary judgment motion containing the Securities and Exchange Commission's allegation that Sourlis wrote a false legend removal letter that included representations that she communicated with individuals who do not exist. The Manhattan  court's ruling found Sourlis liable for aiding and abetting securities fraud but denied an SEC liability claim and postponed a decision on another claim involving registration laws. The attorney has served as counsel to parties in numerous reverse merger transactions. Sourlis was not named when the suit was first filed in February 2010.