PHILADELPHIA, Sept. 24, 2014 (GLOBE NEWSWIRE) -- Michael Goldberg M.D. and Shepard M. Goldberg, both recently elected board members of Echo Therapeutics (Nasdaq:ECTE), have expressed alarm at the press release issued by the Company yesterday evening, September 23rd. Dr. Goldberg and Mr. Goldberg believe the release, which they had not seen prior to its publication, contains numerous errors, misstatements and is not an accurate reflection of the current state of affairs at Echo Therapeutics. In fact, Dr. Goldberg and Mr. Goldberg, in an effort to salvage the company, have negotiated a financing deal that meets and exceeds the terms stated as necessary in the release issued by the opposing members of Echo's board. The proposed plan will allow Echo to continue operations and to reach key valuation events prior to requiring additional capital. The plan set forth by Dr. and Mr. Goldberg has the added benefit of having the support of Echo's former key technical staff members who were terminated yesterday but who remain committed to the company.
The plan discussed above is an agreement between Dr. Goldberg and Mr. Goldberg and Platinum Management (Echo's largest investor with approximately 30% ownership). Platinum Management or its designee, has committed to fund Echo Therapeutics with $3 million over the next 30 weeks (equivalent to $100,000 per week) to be used for the benefit of Echo and its shareholders. One of the key terms of this deal is that only Dr. and Mr. Goldberg, as opposed to the entire Echo board of directors, will have control over these funds. Platinum has proposed that in order to prevent the misuse of these funds, current directors Vincent Enright, James Smith, and William Greico will not have access to Platinum's capital nor have any right to determine how the new funds are utilized. Concretely, these three "lingering directors" will not be able to use the funds invested by Platinum for legal defense of their past actions or any other self-serving purposes.
The funding, while beginning immediately, will not convert into Echo shares until the three lingering directors have been removed. At that time, the investment will convert to a direct investment into Echo Therapeutics, in the form of common stock equivalents and warrants. The investment will convert into common stock equivalents at the lower of $2.00 a share or the market price at that time. While $2.00 per share is greater than a 400% premium to the current price Platinum and Messrs Goldberg are highly confident that, given progress on the plan they have presented to shareholders, and the removal of the toxic governance situation, they can anticipate a rapid recovery in valuation reflecting a going concern and not the liquidation valuation that is currently being reflected. Platinum will also get 100% warrant coverage at an exercise price of $6.00 a share, a 2400% premium to the current stock price. The funding is set to begin next Monday, September 29, 2014. The conversion to equity will officially be consummated upon the removal or resignation of the three "lingering directors." Once the "lingering directors" no longer sit on the board, Platinum plans to move all but 9% (of the total outstanding shares) of its common stock holdings into "toothless" preferred stock thereby significantly reducing its voting power. Additionally, Platinum will agree not to exercise its right to exceed 20% ownership for voting purposes until after the 2016 annual meeting. Further, Platinum will drop all litigation against Echo. Should the three "lingering directors" leave prior to their being removed for cause, Platinum will agree not to litigate against them or the Company for any action that had occurred prior to September 30, 2014.
According to Dr. Goldberg and Mr. Goldberg they believe their plan is clearly in the best interests of Echo and its shareholders. They also believe that the three "lingering directors" must resign in order for Echo to succeed because by the "lingering directors" own admission, the best plan for the company is liquidation. At a time when Echo is deemed "un-investable," Platinum has offered a lifeline.
Mark Nordlicht, Chief Investment Officer of Platinum Management, stated, "We are pleased to be working with the newly elected Independent Directors, Dr. Michael Goldberg and Mr. Shepard Goldberg in seeking to advance the Company's exciting continuous and non-invasive glucose monitoring technology for the benefit of shareholders." Mr. Nordlicht continued, "The end of the hijacking of the Company by the three lingering directors, against the wishes of a majority of shareholders, is near, and we thank Michael and Shepard for their determination in moving the Company forward."
Shepard Goldberg added, "We thank Platinum for their continued support and with this funding we look forward to moving the company forward and to capitalize on the exponential potential of Echo's technology." Finally, Dr. Goldberg commented, "With access to capital, while we go through the trouble of removing the three lingering directors for cause, we hope to maintain as much of the key staff and technical capabilities as possible and we would appreciate it immensely if the lingering three would cease interfering with our good faith efforts to advance the Company."