Biophan pockets $7.25 million from convertibles; oil offerings heat up in Canadian PIPE market

By Sheri Kasprzak

New York, Oct. 12 - Private placement volume remained relatively light on Thursday as the Dow Jones Industrial Average reached a record high.

Even so, one sellsider said he feels market activity is bound to pick up - and sooner rather than later.

"It's a great time to price," he noted. "I can't really see any particular reason volume is low right now, but we're heading toward the end of the year and I fully expect to see more [issuers] pricing before December."

He echoed an earlier statement from another sellsider, who predicts biotech, technology and communications offerings to be among the biggest names in PIPEs.

"Those are all sectors that need capital constantly and they're all sectors that have done pretty well or are at least improving," he noted.

In the broader stock market Thursday, the Dow jumped by 95.57 after hitting a slump on Wednesday to close at a record high of 11,947.70. The Nasdaq composite index gained 37.91 to close at 2,346.18 and the Standard & Poor's 500 composite index climbed 12.88 to end at 1,362.83.

Biophan raises $7.25 million

Leading the light day of PIPE action was a $7.25 million offering of senior secured convertible notes from Biophan Technologies, Inc.

The company issued the notes to a group of institutional investors.

The notes are due in 33 monthly installments and interest will be payable at a minimum of 10% and a maximum of 12% annually in cash or stock at the company's option.

The notes are convertible at $0.67 each, a 9.4% discount to the company's $0.74 closing stock price on Wednesday.

Investors received a number of warrants equal to the amount of shares issuable upon conversion. Half of the warrants are exercisable at $0.81 each and half at $0.89 each.

The investors have the option to buy another $7.25 million in Biophan common stock at $0.67 each with 50% warrant coverage. Half of those warrants are exercisable at $0.7705 each and the other half at $0.8375 each.

C. E. Unterberg, Towbin was placement agent.

Biophan's stock dipped by 5.41%, or 4 cents, to close the session at $0.70 (OTCBB: BIPH).

"I am most pleased with the confidence and support shown by this excellent group of investors in our company," said Michael Weiner, the company's chief executive officer, in a news release. "The funds that are being invested will provide us with the ability to continue to deliver our products and technologies to the market. We will also benefit from the participation of an active institutional shareholder base."

Biophan, a Rochester, N.Y., medical device company, will use the proceeds to continue to bring to market the Myotech Myo-Vad product as well as to continue the development and marketing of its MRI-safe and image-compatible technologies for pacemakers, implantable defibrillators, neurostimulators and other devices.

Oil offerings pick up

Looking to Canadian offerings, energy companies seem to be making a comeback among private placement offerings there.

A Vancouver, B.C.-based market source said even though oil prices have fallen way down in the past month, energy stocks are doing surprisingly well.

"Commodities in general are doing very well and that seems to be pulling these [energy] stocks more than oil is dampening them," he said. "There seems to be a push coming from the broader [Canadian stock] market and that may also have something to do with it."

The Vancouver-based source also noted that a lot of these companies are structuring their offerings with flow-though shares or units because the year is winding down and investors are eager for the tax break associated with those types of structures.

"Flow-through shares get really popular around this time of year," he added.

Oil prices actually rebounded slightly on Thursday, gaining 27 cents to end at $57.86 per barrel.

One of the largest oil offerings this week came from Pegasus Oil & Gas Co. Pegasus issued 8.2 million subscription receipts in that deal at C$2.20 apiece, including a greenshoe for 1.8 million shares exercised by a syndicate of agents led by FirstEnergy Capital Corp.

Proceeds from the offering were C$18.04 million.

The subscription receipts are convertible on a one-for-one basis for class A common shares once Pegasus settles its land acquisition in Central Alberta. The acquisition is slated to wrap up on Nov. 8.

The company's stock remained unmoved on Thursday at C$2.32 (TSX Venture: POG).

On Wednesday Arsenal Energy Inc. announced a flow-through stock offering.

Arsenal intends to sell 5,454,545 shares at C$1.10 each, a 13.4% premium to the company's C$0.97 closing stock price on Tuesday.

The deal is scheduled to close Oct. 18.

Proceeds will be used for Canadian exploration expenses.

Arsenal's stock slipped by 4 cents, or 4.26%, to close at C$0.90 (Toronto: AEI). On Wednesday, the stock dipped by 3 cents, or 3.09%, to close at C$0.94 (Toronto: AEI).

Calgary, Alta.-based Arsenal is an oil and natural gas exploration company.

On Monday, Blue Parrot Energy Inc. priced a C$6 million flow-through stock offering at C$0.30 each.

Blue Parrot is also based in Calgary and its stock closed unchanged at C$0.22 Thursday (TSX Venture: BPA).

Securac raises $2.6 million

Heading up the light day of PIPE action was a $2.6 million convertible offering from Securac Corp.

The 10% notes are due Oct. 5, 2008 and are convertible into common shares at a 25% discount to the average of the closing bid prices for the five trading days before conversion.

The notes are redeemable at 130% of the principal being redeemed plus interest.

The investors received class A warrants for 22,158,021 shares exercisable at $0.07 each and class B warrants for 22,158,021 shares exercisable at $0.08 each. Both sets of warrants expire in five years.

Proceeds will be used for growth and corporate development, as well as debt repayment and general corporate purposes.

The offering was announced Thursday afternoon and the stock ended the day unmoved at $0.07 (OTCBB: SECU).

Securac revenue up in 2006

"This investment provides us additional capital resources to improve our balance sheet and execute our strategic business plan that is focused on accelerating growth and corporate development in the North American governance, risk and compliance market," said Terry Allen, the company's chief executive officer, in a news release.

"It is clear to us that the results of the last several quarters have proven we are improving corporate performance from our acquisition strategy and increased commercialization activities. Our revenues for the first six months of 2006 have nearly exceeded 2005 annual revenue, and the proceeds of this investment will allow us to invest in more sales and marketing initiatives to fuel our continued growth momentum."

Total revenue for the six months ended June 30 was $1,264,001, compared with $473,404 for the corresponding six months of 2005. For the quarter ended June 30, the revenue was $633,391, compared with $287,905 for the same 2005 quarter.

Securac sustained a net loss of $1.36 million for the six months ended June 30, compared with a net loss of $5.43 million for the 2005 period. The quarterly net loss was reported as $832,524 for the period ended June 30, compared with a net loss of $3.40 million for the same quarter of 2005.

Allen did not immediately return calls Thursday for additional comment on the deal.

Calgary, Alta.-based Securac is a software vendor focused on software platforms for risk management and decision support.

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