Champion Pain Care Corp.

00:00 Champion Pain Care. CPAI. It is 2013, and I have decided to take a little break from New York and come up to Canada to relax and recover from some health issues that really just needed rest. I thought: what a great place. It is laid back, I know it well, and there are some cool people around. What a mistake.

00:27 A friend of mine, Greg Worobek, who had come to New York and stayed at my place for a while, said, “Listen, these guys want to go public. They are called Champion Pain Care. They do organic pain management.” I said okay. We had special-purpose acquisition companies ready for a deal. They were essentially blank public vehicles into which a company could be placed, with the particulars and name changed, a symbol obtained, and the required market documentation filed.

01:11 I thought we would do our normal deal: some upfront fees and part of the stock—usually not much, perhaps two or three percent. We would help get them to the public-company stage, do some marketing, explain how it worked, and set them up with the right counsel and accounting.

01:34 I met the group: Dr. Terry Brown, a man named Jason, another person whose role I was not sure about, and Greg heading the effort. We decided to put the deal together. We completed the preliminary exchange agreement, and everyone wanted to come to New York, meet Charlie, and learn about Wall Street. They flew down, visited the Stock Exchange, and Charlie explained how things worked.

02:14 We got the symbol CPAI. I recall that approximately one hundred million shares were initially issued, but that must be checked against the filings. I recall the company opening at approximately a $55 million market capitalization even though the operating business was still at an early stage. The public structure was intended to help obtain financing, enter the United States, and acquire a clinic that could be converted to the new pain-management model.

02:50 I had seen white papers for the approach, although I did not fully understand the clinical side. Financing of approximately $7 million was arranged. My view was that the proceeds should acquire one or perhaps two clinics, fund their conversion, and retain a substantial cash reserve. It was convertible financing with a significant monthly interest burden. If it was not repaid and converted into stock, the lender could receive a substantial position in the company.

03:26 The stock began trading. Then an announcement appeared saying that a clinic had been acquired using the financing proceeds. Charlie and I had not been told in advance. We were concerned that putting all of the proceeds into one clinic was not the best use of funds, but management believed in the clinic, its revenue, and its ability to service the interest payments.

04:05 Charlie had serious concerns. This connects to the collection story, “The Coffee Was the First Red Flag.” As time passed, we asked for the clinic's financial statements and operating information. We then learned of problems associated with a doctor and prior misconduct issues. In my recollection, the licensing transfer was not progressing and the clinic had become a white elephant, leaving the company without the anticipated revenue base while interest obligations continued.

04:48 I spoke with the lenders. They were willing to consider a solution because nobody benefits from immediately shutting a company down and taking whatever remains. We discussed finding another transaction or issuing additional shares. Management did not want to pursue our proposed approach and had its own plan. It was their company, but we had stock and our people involved, so we had skin in the game.

05:47 Management eventually completed a transaction with another person who promised to save the company. A very large number of shares was issued; the filings should be consulted for the exact amount. I do not clearly recall the person's name. He became the new chief executive. In my recollection, the promised restructuring did not materialize. The lenders then converted their position, and that effectively ended Champion Pain Care as an operating company and publicly traded venture.

06:29 The matter did not end there. The lenders wanted recovery and pursued litigation involving company directors. I acted as a point person with Bank of America, where the accounts were held. The lenders pursued additional avenues against directors, but time passed and the situation eventually cleared.

07:19 I believe the lender itself was later disbanded. What remained was a story with considerable damage on all sides and lessons worth preserving. We had also waived fees we would normally have charged because Greg was a friend and we believed the participants would do the right thing. It was a lesson, and hopefully the record gives others a useful warning. That is Champion Pain Care.