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Originally published Saturday, October 30, 2010 at 10:00 PM

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Sunday Buzz

Peeking into the latest local IPO — HaloSource

HaloSource's IPO prospectus, which is barred from circulating in the U.S., lays out ambitious growth targets for this small company that purifies drinking water for emerging-market households. Also: CellCyte Genetics' ex-CEO pays $50K to SEC; and bidders line up to buy new but empty downtown Seattle office building.

Perhaps you'd better swallow the newspaper after reading — this information isn't supposed to reach the U.S.

HaloSource, the Bothell company that sells inexpensive antimicrobial technology for purifying water at the tap, held an $80 million initial public offering this month on the AIM exchange in London.

The deal is noteworthy because: A) companies in the U.S. are having a really hard time going public and B) it's a local company catering to rising standards of living in China, India and other emerging markets.

Just don't try to look at HaloSource's financials.

Because the stock isn't registered in the U.S., you can't buy it here.

So the prospectus, while circulating in the U.K., is "not for release, publication or distribution, directly or indirectly, in whole or in part, in or into the United States," HaloSource says on its website, in adherence to Securities and Exchange Commission (SEC) rules.

If you get a copy anyhow, you see a company that will either deliver remarkable growth this year or frustrate its new London investors.

The prospectus says HaloSource's 2010 revenue "is expected to be 40 to 50 percent above" last year's.

HaloSource had sales of $11.8 million in 2009, up 18 percent, and it posted a $9 million loss. In the first half of 2010 it reported revenues of $6 million and a $4.8 million loss.

Sales of its much-touted HaloPure bead-filled cartridges for water purification are flowing at an increasing rate. But it's hardly a gusher: for the first half of this year, just $770,000.

The prospectus says the HaloPure technology will be the company's "principal growth driver." The coated beads, produced at HaloSource plants in India and China, are built into purification devices sold by a growing array of consumer-products companies.

But they account for less than 13 percent of the company's six-month sales. The bulk came from its water-clarification products: StormKlear for industrial and construction uses and SeaKlear for pools and spas.


Perhaps there's a hockey-sticklike acceleration in the works. HaloPure sales grew 33 percent in the year's first half, and the company's other product lines also grew more rapidly than before.

Still, to meet the ambitious target of exceeding 40 percent growth this year, total second-half sales will have to top $10 million — 60 percent over last year's comparable figure.

There's reason to suspect the company's previous backers weren't 100 percent confident about HaloSource's performance.

The Swiss consumer giant Unilevel cashed in all of its 3.3 million shares as part of the IPO, and the two biggest pre-IPO stockholders also sold the majority of their stake.

CellCyte ex-CEO

pays $50K to SEC

Gary Reys, the former CEO of Bothell biotechnology company CellCyte, has agreed to pay $50,000 to settle SEC civil charges that he knowingly misled investors.

The agreement doesn't include any admission of wrongdoing, but it bars Reys from denying the charges that the SEC filed in September 2009. He must pay the fine from his own pocket.

The agency said that after Reys and a Canadian stock promoter merged CellCyte into a publicly traded shell company in early 2007, he knew the company was making false statements in SEC filings and in investor materials.

Among other things, "Reys knew that CellCyte falsely claimed that its stem-cell drugs were already in FDA-approved clinical trials" and was "within months of starting clinical trials to repair the heart," the SEC said in court papers.

Reys also inflated details about his past career in SEC filings, the agency found. He falsely claimed he was part of the executive team that took a pharmaceutical company public and that as CEO of a local biotech company, he'd led it "from conception to early human clinical trials in 18 months," according to the complaint.

Investor materials with "false and misleading statements" were approved by Reys before the stock promoter, identified in other litigation as Vancouver, B.C., resident Gordon Brent Pierce, touted CellCyte's prospects through "millions of spam e-mails, blast faxes and newsletters," the SEC said.

The Seattle Times reported on the promotional campaign, and Reys' misstatements about his own career, beginning in December 2007.

The promotion briefly lifted CellCyte's market capitalization to more than $450 million, with shares at $7 apiece. The stock now trades for less than 2 cents.

Along with the $50,000 fine, Reys is barred for five years from serving as an officer or director of any public company. The SEC settled similar charges against CellCyte and its chief scientific officer, Ronald Berninger, in 2009.

Reys "is very pleased" to put the case behind him, said his attorney, Jeffrey Coopersmith. He also noted that the Justice Department closed a criminal investigation into the CellCyte promotional campaign earlier this year "after taking a hard look."

The company now has different management, which had no comment on the Reys settlement.

It's not clear what stake remains in the hands of the Canadian promoter who, according to the SEC, at one time controlled 90 percent of CellCyte's publicly available shares.

Buyers line up

for office building

taken by lender

Top real-estate broker-turned-investor Bill Pollard provided tantalizing — but incomplete — glimpses of two deals in the making at the Urban Land Institute's annual forecast breakfast this past week.

First, he said, a whopping 31 firms made offers on the new but empty 7th & Madison office building in Seattle. That's a good sign for the local market, he added.

U.S. Bank, which financed construction of the nine-story downtown building, put it up for sale last month after taking it back from developer Opus Northwest in lieu of foreclosure.

Pollard, who appeared on a panel at the Wednesday breakfast, also said the winning bidder for 7th & Madison offered about $150 a square foot. That multiplies out to about $30 million — considerably less than U.S. Bank loaned Opus, but still better than expected, Pollard added. U.S. Bank had been asking about $35 million.

Pollard wouldn't identify the building's pending owner, but said it's local and has a tenant lined up.

He also revealed that his new investment firm, Talon Private Capital, expects to close on its first building this week. When pressed, he would only say it's in the Seattle area.

Pollard, a co-founder of brokerage Pacific Real Estate Partners, launched Talon a year ago with Jim Neal, another veteran of Seattle commercial real estate.

It counts nearly 20 wealthy families as investors, Pollard said, and is looking for properties one step below the "trophy" buildings that have been trading at a premium lately.

— Eric Pryne

Comments? Send them to Rami Grunbaum: or 206-464-8541.

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