Thursday, March 05, 2015 3:24:27 AM
CORGENIX (CONX) MERGER DD
So there are many, many things we could focus on in the Corgenix merger story (EliTech Group, Orgentec, Water Streets, Inverness etc.) that still have not been fully dug into, but I am just going to focus on one main one today. David Ludvigson and his role. For me at least, doing the DD on him, there is no way not to think the company should be answering a few more questions here. It also screams to me questionable BOD oversight at best, and other less friendly things at worst. Certainly provides some legitimacy to shareholder complaints or lawsuits. Who knows, but my assumption based on things not being settled yet on the latest case, is that the lawyers and/or plaintiffs may have gotten wind of more than what were are privy too at the moment. There are a whole lot of overlapping webs here, just a question of putting the pieces together
PIECE #1
Corgenix's code of conduct and ethics document
Why start with conduct and ethics document which most people have seen before? There is nothing particularly different in the language versus other public companies, but I think it's important to keep this language in mind when reading the information in piece #2.
Also important to remember this part when hearing the word "employee":
Here are a few relevant sections:
Maybe I'm just not seeing it right, but some of what's described below seems to directly contradict this document, particularly the part labeled "Second" below.
PIECE #2
David Ludvigson
Why him? He is a central player in this discussion. Even the company identified him as so in the 8-K filing that postponed the initial merger vote. Now, I have no idea, everything could be above board here certainly and no desire to question Mr. Ludvigson or his role, but I think there are questions here that should be answered. Despite some question surrounding his role and $100,000 payment for closing of deal that some of BOD was not aware of, the BOD decided to continue moving forward.
http://boulderopolis.com/corgenix-delays-shareholder-vote-on-acquisition-again/
There are multiple avenues we could go down on him, but here is the general background.
First
He was appointed to the BOD in 2010 at an agreement with Elitech Group who made a significant investment into Corgenix, and also got distribution rights from them and a board member in exchange. Ludvigson was that board member. Who was Ludvigson in the Elitech landscape? Well he previously was President/COO of Nanogen, a biotech that went bankrupt and whose assets were then acquired by Elitech. He was then named by Elitech Group to be COO for the American side of company's business. Elitech subsidiary Wescor, Inc. is the American subsidiary who actually holds the shares of the company. So with that deal Ludvigson jumps on the board as EliTech's rep and they own ~45% of the OS.
What this means is just bringing merger vote up to be voted on virtually assured it's passage, especially because Elitech was the one pushing for it. Now why they would want to is a whole other question for another day.
Second
So where the Ludvigson part of the story starts to get both fascinating and murky. In the year after being appointed by the BOD, he becomes Chief Marketing Officer for a company called Nanomix (http://nano.com) and then 2 years after in 2013 he becomes CEO of Nanomix. Why does this matter? Well this company is in the exact same diagnostic field as Corgenix. In fact, Corgenix and Nanomix have been apparently been partnering on Ebola test kit. Look at front page of Nanomix and you'll see what I mean. Yet, besides one quick mention of Ludvigson's role at Nanomix in a 2013 DEF14A, there was no other mention in any filing (10-K etc.). Surprising especially in light of his role with the company and the ethics code set out. Regardless of merger question, as a shareholder I certainly would have wanted to know this information. Definetly relevant to how I view Ludvigson and his role with the company.
Third
But, lest you think the story ends there it does not. When the acquisition/merger comes into play things get even murkier. Basically Ludvigson was put in charge of the company's search for a target company in conjunction with Inverness. Yes, the same person who was put on the board by the largest shareholder Elitech (owns 45%+ of OS), who will be paid $100,000 if the deal closes (some BOD unaware of), and who now is the CEO of a similar company, Nanomix, is the main one put in charge of target search along with Inverness for Corgenix's assets. Unusual, at least from where I stand.
Here is text on his role in negotiations and search for targets:
Water Street represented Orgentec who got the agreement
]Incentive Payment Description
All of this for me makes me do a double take. Feel like there may be more than meets the eye. The fact that some BOD unaware of payment arrangement is a bit of a red flag, was the full board aware that he was also CEO of Nanomix?
While, there are many questions out of what I've been finding that might help illuminate things more, I'll start with three.
(1) Who were the other target companies interested in bidding? What was Ludvigson's role in that process? Was he involved in the specific discussions or just Inverness?
(2) What new companies invested in Nanomix in the latest $12 million round at beginning of 2014? (They currently have $50 million in investment funding overall)
(3) Why wasn't the change in Ludvigson's biography adequately communicated to shareholders, in light of companies own polices and widely accepted filing practices of notifying shareholders if there could be a conflict of interest?
On my end, I'm still wrapping my head around the many pieces, and unsure who is benefitting from all of this, but I think at the very least there are alot of questions that shareholders deserve the answers to and hopefully the legal route will open some of them up if the company is not. I am certainly not convinced at all that BOD has been most concerned with acting in the interests of shareholders knowing the information they have known. Would be nice if SEC would peek into to make sure everything is above board here.
So there are many, many things we could focus on in the Corgenix merger story (EliTech Group, Orgentec, Water Streets, Inverness etc.) that still have not been fully dug into, but I am just going to focus on one main one today. David Ludvigson and his role. For me at least, doing the DD on him, there is no way not to think the company should be answering a few more questions here. It also screams to me questionable BOD oversight at best, and other less friendly things at worst. Certainly provides some legitimacy to shareholder complaints or lawsuits. Who knows, but my assumption based on things not being settled yet on the latest case, is that the lawyers and/or plaintiffs may have gotten wind of more than what were are privy too at the moment. There are a whole lot of overlapping webs here, just a question of putting the pieces together
PIECE #1
Corgenix's code of conduct and ethics document
Why start with conduct and ethics document which most people have seen before? There is nothing particularly different in the language versus other public companies, but I think it's important to keep this language in mind when reading the information in piece #2.
Also important to remember this part when hearing the word "employee":
Here are a few relevant sections:
Maybe I'm just not seeing it right, but some of what's described below seems to directly contradict this document, particularly the part labeled "Second" below.
PIECE #2
David Ludvigson
Why him? He is a central player in this discussion. Even the company identified him as so in the 8-K filing that postponed the initial merger vote. Now, I have no idea, everything could be above board here certainly and no desire to question Mr. Ludvigson or his role, but I think there are questions here that should be answered. Despite some question surrounding his role and $100,000 payment for closing of deal that some of BOD was not aware of, the BOD decided to continue moving forward.
http://boulderopolis.com/corgenix-delays-shareholder-vote-on-acquisition-again/
There are multiple avenues we could go down on him, but here is the general background.
First
He was appointed to the BOD in 2010 at an agreement with Elitech Group who made a significant investment into Corgenix, and also got distribution rights from them and a board member in exchange. Ludvigson was that board member. Who was Ludvigson in the Elitech landscape? Well he previously was President/COO of Nanogen, a biotech that went bankrupt and whose assets were then acquired by Elitech. He was then named by Elitech Group to be COO for the American side of company's business. Elitech subsidiary Wescor, Inc. is the American subsidiary who actually holds the shares of the company. So with that deal Ludvigson jumps on the board as EliTech's rep and they own ~45% of the OS.
What this means is just bringing merger vote up to be voted on virtually assured it's passage, especially because Elitech was the one pushing for it. Now why they would want to is a whole other question for another day.
Second
So where the Ludvigson part of the story starts to get both fascinating and murky. In the year after being appointed by the BOD, he becomes Chief Marketing Officer for a company called Nanomix (http://nano.com) and then 2 years after in 2013 he becomes CEO of Nanomix. Why does this matter? Well this company is in the exact same diagnostic field as Corgenix. In fact, Corgenix and Nanomix have been apparently been partnering on Ebola test kit. Look at front page of Nanomix and you'll see what I mean. Yet, besides one quick mention of Ludvigson's role at Nanomix in a 2013 DEF14A, there was no other mention in any filing (10-K etc.). Surprising especially in light of his role with the company and the ethics code set out. Regardless of merger question, as a shareholder I certainly would have wanted to know this information. Definetly relevant to how I view Ludvigson and his role with the company.
Third
But, lest you think the story ends there it does not. When the acquisition/merger comes into play things get even murkier. Basically Ludvigson was put in charge of the company's search for a target company in conjunction with Inverness. Yes, the same person who was put on the board by the largest shareholder Elitech (owns 45%+ of OS), who will be paid $100,000 if the deal closes (some BOD unaware of), and who now is the CEO of a similar company, Nanomix, is the main one put in charge of target search along with Inverness for Corgenix's assets. Unusual, at least from where I stand.
Here is text on his role in negotiations and search for targets:
Water Street represented Orgentec who got the agreement
]Incentive Payment Description
All of this for me makes me do a double take. Feel like there may be more than meets the eye. The fact that some BOD unaware of payment arrangement is a bit of a red flag, was the full board aware that he was also CEO of Nanomix?
While, there are many questions out of what I've been finding that might help illuminate things more, I'll start with three.
(1) Who were the other target companies interested in bidding? What was Ludvigson's role in that process? Was he involved in the specific discussions or just Inverness?
(2) What new companies invested in Nanomix in the latest $12 million round at beginning of 2014? (They currently have $50 million in investment funding overall)
(3) Why wasn't the change in Ludvigson's biography adequately communicated to shareholders, in light of companies own polices and widely accepted filing practices of notifying shareholders if there could be a conflict of interest?
On my end, I'm still wrapping my head around the many pieces, and unsure who is benefitting from all of this, but I think at the very least there are alot of questions that shareholders deserve the answers to and hopefully the legal route will open some of them up if the company is not. I am certainly not convinced at all that BOD has been most concerned with acting in the interests of shareholders knowing the information they have known. Would be nice if SEC would peek into to make sure everything is above board here.
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