BOULDER — A spat between management of Boulder-based Bioptix Inc. (Nasdaq: BIOP) and a Florida shareholder has forced the resignation of three members of the company’s board of directors.
Gail Schoettler (former Colorado lieutenant governor), Susan Evans and David Welch resigned from the company’s board as of Jan. 6, 2017, after biotech investor and Bioptix shareholder Barry Honig commenced legal action in Colorado state court to force a special meeting to remove the directors.
“The members of the Board of the Company have engaged in discussions with principal shareholders of the Company subsequent to the commencement of such action, and, based on such discussions, have determined that if such special meeting were to be held, the proposals submitted by Mr. Honig would be approved by the shareholders,” the departing board members said in a letter to Bioptix CEO Steve Lundy. “Therefore, in the best interests of the Company and its shareholders, in order to preserve the assets of the Company to be used for business purposes, each of the undersigned directors hereby resigns from the Board and each Committee of the Board on which he or she serves, effective as of January 6, 2017.”
Lundy could not be reached for comment before hours, Jan. 9.
Bioptix’ stock fell more than 10 percent Monday, Jan. 9, closing at $3.76 per share.
The resignation letter was submitted as an exhibit to an 8K filing with the U.S. Securities and Exchange Commission, which noted that John O’Rourke, managing member of ATG Capital LLC, and Mike Dai, an associate with ALOE Finance Inc., a financial-consulting and transaction advisory firm, were appointed to the board. Both were supported by Honig.
Honig said in a telephone conversation with BizWest that, “Right now, it’s just a change in the board members to diversify the board. it’s just a change in the guard. The company will continue to try to increase the value to shareholders.”
Castle Rock biotechnology firm Venaxis Inc. acquired Boulder-based BiOptix Diagnostics Inc. in an all-stock transaction worth roughly $2.6 million in September 2016. Venaxis in December changed its name to Bioptix Inc., with operations moved to BiOptix headquarters at 1775 38th St. in Boulder.
Bioptix makes an Enhanced Surface Plasmon Resonance device that is used for the detection of molecular interactions. The device is aimed specifically at helping biotechnology researchers understand earlier in the drug-discovery process whether their target molecules are effective against the disease targeted.
Honig in a Sept. 12, 2016, letter, blasted Venaxis management for its acquisition of BiOptix. He demanded a special meeting of shareholders to replace board members and vote on a $7.5 million shareholder dividend.
At issue was a depletion of cash since Venaxis’ failed merger with Strand Life Sciences in March 2016.
“Venaxis’ board has continued allowing the company to waste precious resources with no clear direction or strategy,” the letter stated. “The failed merger with Strand Life Sciences was an expensive endeavor the brunt of which was borne by your shareholders, of which the board and management represent just a tiny fraction. Had the merger proceeded it would have resulted in immense dilution for shareholders …
“Meanwhile, Venaxis’ cash continues to dwindle while board fees and management salaries continue to be paid.”
Honig noted that, as of Dec. 31, 2014, “Venaxis had approximately $24.5 million in cash and short term investments. At the most recent quarter end, as of June 30, 2016, Venaxis had approximately $16 million in cash and short term investments with a cash burn of approximately $900,000 last quarter …
“Shareholders cannot continue to wait around with question marks and a board that has proven to be distracted and ineffective.”
He followed up with another letter, Sept. 14, in which he questioned BiOptix’ ability to compete with “corporate giants, GE and Danaher …”
Honig accused Lundy of seeking to preserve the positions of management through the BiOptix acquisition.
“As a shareholder of Venaxis learning of the steps you will take to entrench management at the expense of shareholders is deeply disturbing,” Honig wrote, accusing Lundy of “running a failing business.”
He concluded, “You have a clear conflict of interest inasmuch as Jeffrey Peierls an acknowledged friend and the 50% owner of BiOptix brought you the deal and is also a shareholder of Venaxis. This transaction is clearly an inside management job to protect your salaries, benefits, board fees and to avoid a shareholder vote.”
Lundy responded in a letter to shareholders, denying that the acquisition of BiOptix was an “inside job.”
“While Mr. Jeffrey Peierls, who is a long-term investor in Venaxis with minimal holdings and a larger investor in BiOptix, made the initial introduction, Venaxis evaluated the business and made the decision to acquire BiOptix separate of any influence by Mr. Peierls,” Lundy wrote.
He also denied that the acquisition was intended to entrench Venaxis management.
“While many of the opportunities we evaluated did involve potential transactions where the Venaxis management and Board would not have been in control after the transaction, we did not select the BiOptix transaction to entrench the Venaxis Board and management team,” he wrote. “Instead, we believe it is an advantage to the combined company that the skills and experience of our management team and Board provide additional assets to the combined company.”
Lundy denied an assertion by Honig that he had withheld negative information about BiOptix from the Venaxis board.
“This is not an accurate statement,” Lundy wrote. “My obligation as CEO is to keep our Board informed of all relevant information and I have consistently done so as the CEO of Venaxis. Mr. Honig has no grounds to impugn my personal integrity and our management team has consistently provided, and our Board has consistently been vigilant in gathering, all relevant facts before making decisions in the exercise of their fiduciary duties for the good of all Venaxis shareholders.”
Honig declined to say whether, with the board changes, he would continue to pursue the $7.5 million shareholder dividend. “Right now, i’m going to let the current board evaluate the business. I’m a large shareholder, and … i didn’t think it was the best direction (that the company was heading). i think a more active board will evaluate the business and see where it goes to maximize the value.”