Registration No. 333-138351
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2/A
Registration Statement Under The Securities Act Of 1933
(Amendment No. 1)
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RADIAL ENERGY INC.
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(Name of small business issuer in its charter)
Nevada 1311 72-1580091
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(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
1200 Smith Street, Suite 1600, Houston, Texas 77002
(713) 353-4963
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(Address and telephone number of principal executive offices
and principal place of business)
Copies of all communications to:
G. Leigh Lyons Raymond A. Lee, Esq.
President, Chief Executive Greenberg Traurig, LLP
Officer and Chief Financial Officer 650 Town Center Drive, Suite 1700
Radial Energy Inc. Costa Mesa, CA 92626
1200 Smith Street, Suite 1600 (714) 708-6500
Houston, Texas 77002
(713) 353-4963
(Name, address and telephone number
of agent for service)
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
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Title of each Amount to be Proposed maximum Proposed maximum Amount of
class of securities register (1) offering price aggregate offering registration fee
to be registered per unit price
Common Stock 13,333,333 $0.94(2) $12,533,333 $1,341.07
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(1) The 13,333,333 shares being registered for resale are for shares of our
common stock issuable upon conversion of convertible debentures and upon
exercise of warrants to the selling stockholders identified in the
prospectus.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) and 457(g) under the Securities Act of 1933,
using the average of the high and low prices as reported on the OTCBB on
October 30, 2006.
SUBJECT TO COMPLETION, DATED FEBRUARY 20, 2007
PRELIMINARY PROSPECTUS
13,333,333 SHARES
RADIAL ENERGY INC.
COMMON STOCK
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This prospectus relates to the resale of shares of our common stock by
the selling stockholders of Radial Energy Inc. identified in this prospectus.
These shares or interests therein may be offered and sold from time to time by
the selling stockholders named herein or their transferees, and we will not
receive any of the proceeds from the sale of these shares by the selling
stockholders. We will bear the costs relating to the registration of these
shares.
The selling stockholders may dispose of their common stock through
public or private transactions at prevailing market prices, prices related to
prevailing market prices or at privately negotiated prices. The selling
stockholders may include pledgees, donees, transferees, or other successors in
interest. The selling stockholders will pay any sales commissions incurred in
connection with the disposition of shares through this prospectus. We do not
know when or in what amounts a selling stockholder may offer shares for sale.
The selling stockholders may sell some, all or none of the shares offered by
this prospectus.
Our shares are quoted on the OTC Bulletin Board under the symbol
"RENG." The closing price of the shares as quoted on the OTC Bulletin Board on
February 7, 2007 was $0.525 per share.
No underwriter or person has been engaged to facilitate the sale of
shares of common stock in this offering. None of the proceeds from the sale of
stock by the selling stockholders will be placed in escrow, trust or any similar
account.
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YOU SHOULD CAREFULLY CONSIDER "RISK FACTORS" BEGINNING ON PAGE 3 FOR
IMPORTANT INFORMATION YOU SHOULD CONSIDER WHEN DETERMINING WHETHER TO INVEST IN
OUR COMMON STOCK.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS [ ]
TABLE OF CONTENTS
Prospectus Summary................................................. 1
Risk Factors....................................................... 3
Forward-Looking Statements......................................... 9
Use of Proceeds.................................................... 10
Price Range of Common Stock........................................ 11
Dividend Policy.................................................... 11
About The Offering................................................. 12
Selling Stockholders............................................... 12
Plan of Distribution............................................... 13
Description of Business............................................ 15
Management's Plan of Operation..................................... 17
Legal Proceedings.................................................. 18
Management......................................................... 19
Related Party Transactions......................................... 22
Indemnification.................................................... 22
Security Ownership of Certain Beneficial Owners and Management..... 22
Description of Capital Stock....................................... 23
Legal Matters...................................................... 23
Experts............................................................. 23
Where You Can Find More Information................................ 23
Index To Financial Information..................................... F-1
i
PROSPECTUS SUMMARY
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION OR TO
REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THE SELLING STOCKHOLDERS ARE
OFFERING TO SELL, AND SEEKING OFFERS TO BUY, ONLY THE SHARES OF COMMON STOCK
COVERED BY THIS PROSPECTUS, AND ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS
WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CURRENT ONLY AS OF ITS DATE, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE SHARES. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
IN THIS PROSPECTUS, THE WORDS "RADIAL ENERGY," "COMPANY," "WE," "OUR,"
"OURS" AND "US" REFER ONLY TO RADIAL ENERGY INC. (UNLESS INDICATED OTHERWISE),
AND NOT TO ANY OF THE SELLING STOCKHOLDERS. THE FOLLOWING SUMMARY CONTAINS BASIC
INFORMATION ABOUT THIS OFFERING. YOU SHOULD READ CAREFULLY THIS ENTIRE
PROSPECTUS, INCLUDING THE "RISK FACTORS," FINANCIAL INFORMATION AND RELATED
NOTES, AS WELL AS THE DOCUMENTS WE HAVE INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION.
COMPANY BACKGROUND
Our company was incorporated in the State of Nevada on June 30, 2000,
under the name of "All Printer Supplies.com." On April 17, 2003, we changed our
name to "BV Pharmaceuticals, Inc." and became a provider of information and
services in the areas of personal DNA collection, analysis, profiling, banking
and DNA profile database maintenance. Effective as of April 3, 2006, through a
statutory merger with our wholly owned subsidiary in which we were the surviving
corporation, we changed our name to "Radial Energy Inc."
Radial Energy Inc. is a Nevada corporation. Our common stock is quoted
for trading on the OTC Bulletin Board under the symbol RENG. Our principal
executive offices are located at 1200 Smith Street, Suite 1600, Houston, Texas
77002. Our telephone number is (713) 353-4963. Our fax number is (713) 353-8740.
We maintain a website at www.radialenergyinc.com.
BUSINESS OVERVIEW
In March 2006, we began a new business plan concentrating on the
acquisition, exploration, development, and production of domestic and
international oil and gas projects. Radial Energy's primary focus is on
identifying previously drilled but subsequently abandoned wells that encountered
and/or tested live oil or natural gas indicating the presence of marketable
hydrocarbons, reservoir, and trap. As of the date of filing of this prospectus,
we hold the right to purchase interests in projects in South America and in
Texas and are continuing to explore other opportunities in North America and
Latin America.
We are an exploration stage company that has not generated revenues
from our current operations in the oil and gas industry. There is no historical
financial information about Radial Energy upon which to base an evaluation of
our performance. We cannot guarantee we will be successful in our new core
business or in any business operations. Our business is subject to risks
inherent in the establishment of a new business enterprise, including limited
capital resources and in the exploration of oil and gas reserves.
Future financing may not be available to us on acceptable terms. If
financing is not available on satisfactory terms, we may be unable to continue
with our current business plan. If equity financing is available to us on
acceptable terms, it could result in additional dilution to our existing
stockholders.
PRIVATE PLACEMENT
On October 2, 2006, we entered into a Securities Purchase Agreement
with Cornell Capital Partners, LP for the private placement of secured
convertible debentures (the "Debentures") in the aggregate principal amount of
$5 million. We closed on the first $2 million on October 4, 2006; an additional
$1.5 million will be funded on the date a registration statement covering the
resale of the shares underlying the securities is filed with the Securities and
Exchange Commission (the "SEC"); and the final $1.5 million will be funded
within three business days after the registration statement is declared
effective by the SEC. As part of the transaction, we issued to the purchaser
warrants (the "Warrants") to purchase an aggregate of 8,166,666 shares of our
common stock, and we are obligated to issue to the purchaser an additional
Warrant to purchase 1,000,000 shares of our common stock when the final tranche
is funded. This prospectus relates to the resale of an aggregate of 13,333,333
shares of common stock issuable upon the exercise of the Warrants and upon the
conversion of the Debentures.
1
THE OFFERING
This prospectus relates to the resale of shares of our common stock by
the selling stockholders of Radial Energy Inc. identified in this prospectus.
We are not selling any shares of common stock in this offering, and we
will not receive any of the proceeds from the sale of these shares by the
selling stockholders. All costs associated with this registration will be borne
by us.
The selling stockholders identified in this prospectus, or their
pledgees, donees, transferees or other successors-in-interest, may offer the
shares from time to time through public or private transactions at prevailing
market prices, at prices related to prevailing market prices or at privately
negotiated prices. We do not know when or in what amounts a selling stockholder
may offer shares for sale. The selling stockholders may sell some, all or none
of the shares offered by this prospectus.
Common stock outstanding as of
February 5, 2007 44,585,824
Common stock offered by selling
stockholders Up to 13,333,333 shares
Use of proceeds We will not receive any of the
proceeds from the sale of the common
stock by the selling stockholders
under this prospectus. See "Use of
Proceeds" for a complete description.
OTCBB Trading symbol RENG
Risk Factors The securities offered by this
prospectus are speculative and
involve a high degree of risk and
investors purchasing securities
should not purchase the securities
unless they can afford the loss of
their entire investment. See "Risk
Factors" beginning on page 3.
2
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS SPECULATIVE AND INVOLVES A HIGH
DEGREE OF RISK AND UNCERTAINTY. YOU SHOULD CAREFULLY CONSIDER THE RISKS
DESCRIBED BELOW, TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF
OUR COMPANY, BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.
RISKS RELATED TO OUR COMPANY
WE ARE AN EXPLORATION STAGE COMPANY AND THE LIKELIHOOD OF OUR REACHING
THE DEVELOPMENT STAGE IS REMOTE.
Our company has no revenues from operations and must be considered in
the exploration stage. We have no ongoing oil and gas operations of any kind.
Potential investors should be aware that the likelihood of our company reaching
the development stage is remote.
WE HAVE A LIMITED OPERATING HISTORY, AND IF WE ARE NOT SUCCESSFUL IN
CONTINUING TO GROW OUR BUSINESS, THEN WE MAY HAVE TO SCALE BACK OR EVEN CEASE
OUR ONGOING BUSINESS OPERATIONS.
Our company has a limited operating history. The success of the company
is significantly dependent on a successful acquisition, drilling, completion and
production program. Our company's operations will be subject to all the risks
inherent in the establishment of a developing enterprise and the uncertainties
arising from the absence of a significant operating history. We may be unable to
locate recoverable reserves and be forced to cease operations. We are in the
exploration stage and potential investors should be aware of the difficulties
normally encountered by enterprises in the exploration stage. If our business
plan is not successful, and we are not able to operate profitably, investors may
lose some or all of their investment in our company.
OUR COMPANY'S INDEPENDENT AUDITORS HAVE EXPRESSED A RESERVATION THAT OUR COMPANY
CAN CONTINUE AS A GOING CONCERN.
Our company's operations have been limited to general administrative
operations and a limited amount of exploration. Our company's ability to
continue as a going concern is dependent on our ability to raise additional
capital to fund future operations and ultimately to attain profitable
operations. Accordingly, these factors raise substantial doubt as to the
company's ability to continue as a going concern.
WE DO NOT OPERATE PROFITABLY OR GENERATE POSITIVE CASH FLOW, AND AS A RESULT, WE
MAY BE FORCED TO CURTAIL OR CLOSE OUR OPERATIONS.
If we cannot generate positive cash flows in the future, or raise
sufficient financing to continue our normal operations, then we may be forced to
scale down or even close our operations. In particular, additional capital may
be required in the event that:
o we are unable to successfully explore and develop our current
projects;
o drilling and completion costs for further wells increase beyond
our expectations; or
o we encounter greater costs associated with general and
administrative expenses or offering costs.
The occurrence of any of the aforementioned events could adversely
affect our ability to meet our business plans.
We will depend almost exclusively on outside capital to pay for the
continued exploration and development of our properties. Such outside capital
may include the sale of additional stock and/or commercial borrowing. Capital
may not continue to be available if necessary to meet these continuing
exploration and development costs or, if the capital is available, that it will
be on terms acceptable to us. The issuance of additional equity securities by us
would result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
If we are unable to obtain financing in the amounts and on terms deemed
acceptable to us, we may be unable to continue our business and as a result may
be required to scale back or cease operations for our business, the result of
which would be that our stockholders would lose some or all of their investment.
EXPANSION OF OUR OPERATIONS REQUIRES SIGNIFICANT CAPITAL EXPENDITURES AND WE MAY
BE UNABLE TO OBTAIN SUFFICIENT FINANCING RESULTING IN THE ABANDONMENT OF
OTHERWISE VALUABLE PROJECTS.
Our business model contemplates expansion of our business by drilling
on our existing properties and identifying and acquiring additional oil and gas
properties. We intend to rely on external sources of financing to meet the
capital requirements associated with the exploration and expansion of our oil
and gas operations. We plan to obtain the future funding that we will need
through debt and equity markets, but we cannot be assured that we will be able
to obtain additional funding when it is required or that it will be available to
us on commercially acceptable terms.
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We also intend to make offers to acquire oil properties in the ordinary
course of our business. If these offers are accepted, our capital needs will
increase substantially. If we fail to obtain the funding that we need when it is
required, we may have to forego or delay potentially valuable opportunities to
acquire new oil and gas properties or default on existing funding commitments to
third parties and forfeit or dilute our rights in existing oil property
interests.
OUR ABILITY TO CONTINUE OPERATIONS IS DEPENDENT UPON OUR ABILITY TO SUCCESSFULLY
IDENTIFY, ACQUIRE AND DEVELOP OIL PROPERTIES.
Our future performance depends upon our ability to find, develop and
acquire oil and gas reserves that are economically recoverable. Without
successful exploration, exploitation or acquisition activities, we will not be
able to develop reserves or generate revenues. We may not be able to find and
develop or acquire reserves on acceptable terms, or that commercial quantities
of oil and gas deposits may not be discovered sufficient to enable us to recover
our acquisition, exploration and development costs or sustain our business.
The successful acquisition and development of oil and gas properties
requires an assessment of recoverable reserves, future oil prices and operating
costs, potential environmental and other liabilities and other factors. Such
assessments are necessarily inexact and their accuracy inherently uncertain. In
addition, no assurances can be given that our exploitation and development
activities will result in the discovery of any reserves. Our operations may be
curtailed, delayed or canceled as a result of lack of adequate capital and other
factors, such as title problems, weather, compliance with governmental
regulations or price controls, mechanical difficulties, or unusual or unexpected
formations, pressures and/or work interruptions. In addition, the costs of
exploitation and development may materially exceed initial estimates.
We can provide no assurance that oil and gas will be discovered in
commercial quantities in any of the properties we currently hold interests in or
properties in which we may acquire interests in the future. Our success will
depend upon our ability to acquire working and revenue interests in properties
upon which oil reserves are ultimately discovered in commercial quantities. We
do not have an established history of locating and developing properties that
have oil and gas reserves.
WE ARE MINORITY STAKEHOLDERS IN SOME OF OUR PROJECTS AND WE DO NOT CONTROL ALL
OF OUR OPERATIONS.
We are minority stakeholders in some of our projects and may be
obligated to fulfill the interests of our majority partners. We do not operate
all of our properties and we therefore have limited influence over the testing,
drilling and production operations of our properties. Our lack of control could
result in the following:
o the operator might initiate exploration or development on a
faster or slower pace than we prefer resulting in our company
foregoing all of a portion of our exploration investment;
o the operator might propose to drill more wells or build more
facilities on a project than we have funds for or that we deem
appropriate, which could mean that we are unable to participate
in the project or share in the revenues generated by the project
even though we paid our share of exploration costs;
o we could have our working interest ownership in the related lands
and petroleum reserves reduced as a result of our failure to
participate in development expenditures despite having paid for
the rights to these revenues; and
o if an operator refuses to initiate a project, we may be unable to
pursue the project as we have limited capital, no field personnel
or equipment, and no existing field operations.
Any of these events could materially reduce the value of our properties and
could result in loss of our investment.
OUR ABILITY TO ENGAGE IN AND TO COMPLETE THE FUTURE EXPLORATION AND DEVELOPMENT
PROJECTS DESCRIBED IN THE PROSPECTUS ARE SUBJECT TO SEVERAL UNCERTAINTIES THAT
MAY CAUSE US TO LOSE OUR INTEREST IN THOSE PROJECTS OR CAUSE US TO ABANDON THOSE
PROJECTS BEFORE WE ARE ABLE TO RECOGNIZE ANY REVENUE FROM THEM.
Our current exploitation and development plans are described in this
prospectus under the sections title "Description of Business," and "Management's
Plan of Operation." Whether we ultimately undertake or complete an exploitation
or development project is dependent upon the following factors:
o availability and cost of capital as our projects contain
contractual obligations to fund operations on short notice and
failure to fund may result in the termination of our
participation;
o receipt of additional seismic data or the reprocessing of
existing data;
o our decision to pursue our project was based on current and
projected oil or natural gas prices and declining prices will
reduce the economic feasibility of our exploration projects
resulting in our decision to abandon such projects;
o the costs and availability of drilling rigs and other equipment
supplies and personnel necessary to conduct these operations;
o success or failure of activities in similar areas;
4
o changes in the estimates of the costs to complete the projects;
o our ability to attract other industry partners to acquire a
portion of the working interest to reduce costs and exposure to
risks; and
o decisions of our joint working interest owners and partners.
We will continue to gather data about our projects and it is possible that
additional information will cause us to alter our schedule or determine that a
project should not be pursued at all. Any one of the foregoing factors may cause
our plan of operation to be materially changed from that described in this
prospectus.
OUR DECISION TO INVEST IN CERTAIN OIL AND GAS PROPERTIES RELIES HEAVILY UPON
RESERVE, GEOLOGICAL AND ENGINEERING DATA, AND DISCREPANCIES BETWEEN ACTUAL
RECOVERABLE RESERVES AND ESTIMATED RECOVERABLE RESERVES MAY OCCUR DUE TO DATA
ERRORS, FAULTY ASSUMPTIONS AND MISINTERPRETATIONS.
The reserve, geological and engineering data information that we use in
evaluating oil and gas prospects is based on estimates involving a great deal of
uncertainty. Different engineers may make different estimates of reserves and
cash flows based on the same available data. Reserve estimates depend in large
part upon the reliability of available geologic and engineering data, which is
inherently imprecise. Geologic and engineering data are used to determine the
probability that a reservoir of oil and gas exists at a particular location, and
whether oil and/or gas and natural gas are recoverable from a reservoir.
Recoverability is ultimately subject to the accuracy of data including, but not
limited to, geological characteristics of the reservoir, structure, reservoir
fluid properties, the size and boundaries of the drainage area, reservoir
pressure, and the anticipated rate of pressure depletion. The evaluation of
these and other factors is based upon available seismic data, computer modeling,
well tests and information obtained from production of oil and gas from adjacent
or similar properties, but the probability of the existence and recoverability
of reserves is less than 100% and actual recoveries of proved reserves can
differ from estimates.
Reserve estimates also require numerous assumptions relating to
operating conditions and economic factors, including the price at which
recovered oil and gas can be sold, the costs of recovery, assumptions concerning
future operating costs, severance and excise taxes, development costs and
workover and remedial costs, prevailing environmental conditions associated with
drilling and production sites, availability of enhanced recovery techniques,
ability to transport oil and gas to markets and governmental and other
regulatory factors, such as taxes and environmental laws. A negative change in
any one or more of these factors could result in quantities of oil and gas
previously estimated as proved reserves becoming uneconomic. For example, a
decline in the market price of oil or gas to an amount that is less than the
cost of recovery of such oil or gas in a particular location could make
production commercially impracticable. The risk that a decline in price could
have that effect is magnified in the case of reserves requiring sophisticated or
expensive production enhancement technology and equipment, such as some types of
heavy oil. Each of these factors, by having an impact on the cost of recovery
and the rate of production, will also affect the present value of future net
cash flows from estimated reserves.
ESSENTIAL EQUIPMENT MIGHT NOT BE AVAILABLE WHICH WOULD RESTRICT OUR ABILITY TO
EXPLORE IN THOSE AREAS CAUSING DELAY OR FAILURE IN THE IMPLEMENTATION OF OUR
BUSINESS PLAN.
Oil and gas exploitation and development activities depend upon the
availability of drilling and related equipment in the particular areas where
those activities will be conducted. Demand for that equipment or access
restrictions may affect the availability of that equipment to us and delay our
exploitation and development activities. Further, our operations are spread over
a vast geographical location including multiple countries and remote locations
making it difficult to ship, maintain and repair equipment. Extended delays in
obtaining, repairing or maintaining our equipment could result in the expiration
of leaseholds and/or the inability for our company to meet its contractual
obligations resulting in the loss of our investment.
THE LOSS OF KEY EMPLOYEES WOULD MATERIALLY ADVERSELY AFFECT OUR ABILITY TO
OPERATE OUR BUSINESS AND IMPLEMENT OUR BUSINESS PLAN.
Our business operations are managed by two key employees, G. Leigh
Lyons, our President, Chief Executive Officer, and Chief Financial Officer, and
Omar Hayes, our Chief Operating Officer. The loss of the services of such
employees could seriously impair our business operations. We do not have key man
life insurance on any of our executives.
Our company relies heavily on external firms for consulting,
engineering, accounting and legal services. Without positive cash flows or
additional financing, we will not be able to continue to rely on external firms
and we may be forced to scale down or even close our operations.
OUR BYLAWS CONTAIN PROVISIONS INDEMNIFYING OUR OFFICERS AND DIRECTORS AGAINST
ALL COSTS, CHARGES AND EXPENSES INCURRED BY THEM.
Our bylaws contain provisions with respect to the indemnification of
our officers and directors against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, actually and reasonably
incurred by him, including an amount paid to settle an action or satisfy a
judgment in a civil, criminal or administrative action or proceeding to which he
is made a party by reason of his being or having been one of our directors or
officers.
5
OUR BYLAWS DO NOT CONTAIN ANTI-TAKEOVER PROVISIONS, WHICH COULD RESULT IN A
CHANGE OF OUR MANAGEMENT AND DIRECTORS IF THERE IS A TAKE-OVER OF OUR COMPANY.
We do not currently have a shareholder rights plan or any anti-takeover
provisions in our bylaws. Without any anti-takeover provisions, there is no
deterrent for a take-over of our company, which may result in a change in our
management and directors.
RISKS RELATED TO OUR INDUSTRY
THE SUCCESSFUL IMPLEMENTATION OF OUR BUSINESS PLAN IS SUBJECT TO RISKS INHERENT
IN THE OIL AND GAS BUSINESS.
Our oil and gas operations are subject to the economic risks typically
associated with exploration, development and production activities, including
the necessity of significant expenditures to locate and acquire properties and
to drill exploratory wells. In addition, the cost and timing of drilling,
completing and operating wells is often uncertain. In conducting exploration and
development activities, the presence of unanticipated pressure or irregularities
in formations, miscalculations or accidents may cause our exploration,
development and production activities to be unsuccessful. This could result in a
total loss of our investment in a particular property. If exploration efforts
are unsuccessful in establishing proved reserves and exploration activities
cease, the amounts accumulated as unproved costs will be charged against
earnings as impairments.
THE OIL AND GAS INDUSTRY IS HIGHLY COMPETITIVE AND MAY RESTRICT OUR ABILITY TO
SUCCESSFULLY ACQUIRE, EXPLORE AND DEVELOP ADDITIONAL PROPERTIES.
The oil and gas industry is highly competitive. We compete with oil and
gas companies and other individual producers and operators, many of which have
longer operating histories and substantially greater financial and other
resources than we do, as well as companies in other industries supplying energy,
fuel and other needs to consumers. Many of these companies not only explore for
and produce crude oil and gas, but also carry on refining operations and market
petroleum and other products on a worldwide basis. Our larger competitors, by
reason of their size and relative financial strength, can more easily access
capital markets than we can and may enjoy a competitive advantage in the
recruitment of qualified personnel. They may be able to absorb the burden of any
changes in laws and regulation in the jurisdictions in which we do business and
handle longer periods of reduced prices of gas and oil more easily than we can.
Our competitors may be able to pay more for productive oil and gas properties
and may be able to define, evaluate, bid for and purchase a greater number of
properties and prospects than we can. Our ability to acquire additional
properties in the future will depend upon our ability to conduct efficient
operations, evaluate and select suitable properties, implement advanced
technologies and consummate transactions in a highly competitive environment.
OIL AND GAS OPERATIONS ARE SUBJECT TO COMPREHENSIVE REGULATION WHICH MAY CAUSE
SUBSTANTIAL DELAYS OR REQUIRE CAPITAL OUTLAYS IN EXCESS OF THOSE ANTICIPATED
CAUSING AN ADVERSE EFFECT ON OUR COMPANY.
Oil and gas operations are subject to federal, state, and local laws
relating to the protection of the environment, including laws regulating removal
of natural resources from the ground and the discharge of materials into the
environment. Oil and gas operations are also subject to federal, state, and
local laws and regulations which seek to maintain health and safety standards by
regulating the design and use of drilling methods and equipment. Various permits
from government bodies are required for drilling operations to be conducted; no
assurance can be given that such permits will be received. Environmental
standards imposed by federal, provincial, or local authorities may be changed
and any such changes may have material adverse effects on our activities.
Moreover, compliance with such laws may cause substantial delays or require
capital outlays in excess of those anticipated, thus causing an adverse effect
on us. Additionally, we may be subject to liability for pollution or other
environmental damages which it may elect not to insure against due to
prohibitive premium costs and other reasons. To date we have not been required
to spend any material amount on compliance with environmental regulations.
However, we may be required to do so in future and this may affect our ability
to expand or maintain our operations.
ANY CHANGE TO GOVERNMENT REGULATION/ADMINISTRATIVE PRACTICES MAY HAVE A NEGATIVE
IMPACT ON OUR ABILITY TO CONTINUE OPERATIONS AND OUR ABILITY TO BECOME
PROFITABLE IN THE FUTURE.
The laws, regulations, policies or current administrative practices of
any governmental body, organization or regulatory agency in the United States or
any other jurisdiction, may be changed, applied or interpreted in a manner which
will fundamentally alter the ability of our company to carry on our business.
The actions, policies or regulations, or changes thereto, of any governmental
body or regulatory agency, or other special interest groups, may have a
detrimental effect on us. Any or all of these situations may have a negative
impact on our ability to operate and/or our profitably.
6
THE MARKETABILITY OF NATURAL RESOURCES WILL BE AFFECTED BY NUMEROUS FACTORS
BEYOND OUR CONTROL WHICH MAY RESULT IN US NOT RECEIVING AN ADEQUATE RETURN ON
INVESTED CAPITAL TO BE PROFITABLE OR VIABLE.
The marketability of natural resources which may be acquired or
discovered by us will be affected by numerous factors beyond our control. These
factors include market fluctuations in oil and gas pricing and demand, the
proximity and capacity of natural resource markets and processing equipment,
governmental regulations, land tenure, land use, regulation concerning the
importing and exporting of oil and gas and environmental protection regulations.
The exact effect of these factors cannot be accurately predicted, but the
combination of these factors may result in us not receiving an adequate return
on invested capital to be profitable or viable.
MARKET FLUCTUATIONS IN THE PRICES OF OIL AND GAS COULD ADVERSELY AFFECT OUR
PROPERTIES REDUCING THE RETURN ON INVESTED CAPITAL BELOW LEVELS DEEMED NECESSARY
TO CONTINUE OPERATIONS.
Prices for oil and gas tend to fluctuate significantly in response to
factors beyond our control. These factors include, but are not limited to, the
continued war in the Middle East and actions of the Organization of Petroleum
Exporting Countries and its maintenance of production constraints, the U.S.
economic environment, weather conditions, the availability of alternate fuel
sources, transportation interruption, the impact of drilling levels on crude oil
and gas supply, and the environmental and access issues that could limit future
drilling activities for the industry.
Changes in commodity prices may significantly affect our capital
resources, liquidity and expected operating results. Price changes directly
affect revenues and can indirectly impact expected production by changing the
amount of funds available to reinvest in exploration and development activities.
Reductions in oil and gas prices not only reduce revenues and profits, but could
also reduce the quantities of reserves that are commercially recoverable.
Significant declines in prices could result in non-cash charges to earnings due
to impairment.
Changes in commodity prices may also significantly affect our ability
to estimate the value of producing properties for acquisition and divestiture
and often cause disruption in the market for oil and gas producing properties,
as buyers and sellers have difficulty agreeing on the value of the properties.
Price volatility also makes it difficult to budget for and project the return on
acquisitions and development and exploitation of projects. We expect that
commodity prices will continue to fluctuate significantly in the future.
RISKS RELATED TO OUR STOCK
TRADING IN OUR COMMON SHARES ON THE OTC BULLETIN BOARD IS LIMITED AND SPORADIC
MAKING IT DIFFICULT FOR OUR SHAREHOLDERS TO SELL THEIR SHARES OR LIQUIDATE THEIR
INVESTMENTS.
Our common shares are currently quoted on the OTC Bulletin Board. The
trading price of our common shares has been subject to wide fluctuations.
Trading prices of our common shares may fluctuate in response to a number of
factors, many of which will be beyond our control. The stock market has
generally experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of companies with no
current business operation. There can be no assurance that trading prices and
price earnings ratios previously experienced by our common shares will be
matched or maintained. These broad market and industry factors may adversely
affect the market price of our common shares, regardless of our operating
performance.
In the past, following periods of volatility in the market price of a
company's securities, securities class-action litigation has often been
instituted. Such litigation, if instituted, could result in substantial costs
for us and a diversion of management's attention and resources.
WE PLAN TO ISSUE ADDITIONAL SHARES OR RAISE FUNDS THROUGH THE SALE OF EQUITY
SECURITIES, AND IF WE ARE ABLE TO DO SO, YOUR INTERESTS IN OUR COMPANY WILL BE
DILUTED AND YOU MAY SUFFER DILUTION IN YOUR NET BOOK VALUE PER SHARE.
In the event that we are required to issue any additional shares or
enter into private placements to raise financing through the sale of equity
securities, your interests in our company will be diluted and you may suffer
dilution in your net book value per share depending on the price at which such
securities are sold. If we issue any such additional shares, such issuances also
will cause a reduction in the proportionate ownership and voting power of all
other shareholders. Further, any such issuance may result in a change in our
control without your consent or the consent of a majority of the shareholders.
7
THE HOLDERS OF THE CONVERTIBLE DEBENTURES HAVE THE OPTION OF CONVERTING THE
CONVERTIBLE DEBENTURES INTO SHARES OF OUR COMMON STOCK. THE HOLDERS OF THE
CONVERTIBLE DEBENTURES MAY ALSO EXERCISE THEIR COMMON SHARE PURCHASE WARRANTS.
IF THE CONVERTIBLE DEBENTURES ARE CONVERTED OR THE SHARE PURCHASE WARRANTS ARE
EXERCISED, THERE WILL BE DILUTION OF YOUR SHARES OF OUR COMMON STOCK.
The issuance of shares of our common stock upon conversion of the
convertible debentures and upon exercise of the share purchase warrants will
result in dilution to the interests of other holders of our common stock. The
principal amount of the convertible debentures may be converted at the option of
the holders into shares of our common stock at the lower of a fixed price of
$1.0536 per share or 90% of the lowest daily volume weighted average trading
price per share for the 15 trading days prior to conversion, subject to
adjustment pursuant to the anti-dilution provisions as set forth in the
convertible debentures. Each convertible debenture and each share purchase
warrant is subject to anti-dilution protection upon the occurrence of certain
events. If, among other things, we offer, sell or otherwise dispose of or issue
any of our common stock (or any equity, debt or other instrument that is at any
time over its life convertible into or exchangeable for our common stock) at an
effective price per share that is less than the conversion price of the
convertible debenture or the exercise price of the share purchase warrant, the
conversion price of the convertible debentures or the exercise price of the
warrants will be reduced, depending on the number of shares of common stock that
we issue at that lower price, to a price which is less than the conversion price
or the exercise price.
THE HOLDER OF THE CONVERTIBLE DEBENTURES HAS THE OPTION OF CONVERTING THE
PRINCIPAL OUTSTANDING UNDER THE CONVERTIBLE DEBENTURES INTO SHARES OF OUR COMMON
STOCK. IF THE HOLDER CONVERTS THE CONVERTIBLE DEBENTURES, THERE WILL BE DILUTION
OF YOUR SHARES OF OUR COMMON STOCK.
At the conclusion of our private placement with Cornell Capital
Partners, we will have issued convertible debentures in the aggregate principal
amount of $5,000,000 to Cornell Capital Partners. Although the shares of common
stock to be issued upon conversion of the debentures under the existing
conversion price (prior to any potential adjustments according to the terms of
the debentures) are included in this prospectus, they have not yet been issued,
and in addition, the conversion of the debentures could be effected in whole or
in part in respect of the then outstanding principal under the debentures.
Further, the terms of the debenture provide that under certain circumstances,
the conversion price will be reduced. The conversion of the convertible
debentures will result in dilution to the interests of other holders of our
common stock since the holder may ultimately convert the full amount of the
convertible debentures and sell all of these shares into the public market. The
following table sets forth the number and percentage of shares of our common
stock that would be issuable if the holder of the debentures converted at the
base fixed conversion price of $1.0536 and reduced conversion prices of $0.90,
$0.80, $0.70, $0.60 and $0.50.
-----------------------------------------------------------------------
Number of Shares Issuable
on Conversion of Percentage of Issued
Conversion Price Convertible Debentures(1) and Outstanding(2)
-----------------------------------------------------------------------
$1.0536 4,745,634 9.6%
-----------------------------------------------------------------------
$0.90 5,555,556 11.1%
-----------------------------------------------------------------------
$0.80 6,250,000 12.3%
-----------------------------------------------------------------------
$0.70 7,142,857 13.8%
-----------------------------------------------------------------------
$0.60 8,333,333 15.7%
-----------------------------------------------------------------------
$0.50 10,000,000 18.3%
-----------------------------------------------------------------------
(1) Represents the number of shares issuable if all principal amounts of all
of the convertible debentures were converted at the corresponding
conversion price.
(2) Represents the percentage of the total outstanding common stock that the
shares issuable on conversion of the convertible debentures without regard
to any contractual or other restriction on the number of securities the
selling stockholder may own at any point in time. Based on 44,585,824
shares issued and outstanding on February 5, 2007.
8
BECAUSE OF THE EARLY STAGE OF DEVELOPMENT AND THE NATURE OF OUR BUSINESS, OUR
SECURITIES ARE CONSIDERED HIGHLY SPECULATIVE.
Our securities must be considered highly speculative, generally because
of the nature of our business and the early stage of its development. We are
engaged in the business of exploring and, if warranted, developing commercial
reserves of oil and gas. Our properties are in the exploration stage only and
are without known reserves of oil and gas. Accordingly, we have not generated
any revenues nor have we realized a profit from our operations to date and there
is little likelihood that we will generate any revenues or realize any profits
in the short term. Any profitability in the future from our business will be
dependent upon locating and developing economic reserves of oil and gas, which
itself is subject to numerous risk factors as set forth herein. Since we have
not generated any revenues, we will have to raise additional monies through the
sale of our equity securities or debt in order to continue our business
operations.
A DECLINE IN THE PRICE OF OUR COMMON STOCK COULD AFFECT OUR ABILITY TO RAISE
FURTHER WORKING CAPITAL AND ADVERSELY IMPACT OUR OPERATIONS.
A prolonged decline in the price of our common stock could result in a
reduction in the liquidity of our common stock and a reduction in our ability to
raise capital. Because our operations have been primarily financed through the
sale of equity securities, a decline in the price of our common stock could be
especially detrimental to our liquidity and our continued operations. Any
reduction in our ability to raise equity capital in the future would force us to
reallocate funds from other planned uses and would have a significant negative
effect on our business plans and operations, including our ability to develop
new projects and continue our current operations. If our stock price declines,
we may not be able to raise additional capital or generate funds from operations
sufficient to meet our obligations.
WE DO NOT EXPECT TO PAY DIVIDENDS.
We have not paid dividends since inception on our common stock, and we
do not contemplate paying dividends in the foreseeable future on our common
stock in order to use all of our earnings, if any, to finance expansion of our
business plans.
IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD, WE COULD BE INVESTIGATED BY THE SEC OR WE COULD
INCUR LIABILITY TO OUR SHAREHOLDERS.
Companies trading on the OTC Bulletin Board, such as us, must be
reporting issuers under Section 12 of the Securities Exchange Act of 1934, as
amended, and must be current in their reports under Section 13, in order to
maintain price quotation privileges on the OTC Bulletin Board. If we fail to
remain current on our reporting requirements, we could be removed from the OTC
Bulletin Board. As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of stockholders to sell their securities in the
secondary market. Failure to remain current in our reporting obligations might
also subject us to SEC investigation or private rights of action by our
shareholders.
OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OFF THE SEC AND THE
TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
The SEC has adopted Rule 15g-9 which establishes the definition of a
"penny stock," for the purposes relevant to us, as any equity security that has
a market price of less than $5.00 per share or with an exercise price of less
than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for
transactions in penny stocks; and
o the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny
stocks, the broker or dealer must:
o obtain financial information and investment experience objectives
of the person; and
o make a reasonable determination that the transactions in penny
stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
9
The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prescribed by the SEC relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the
suitability determination; and
o that the broker or dealer received a signed, written agreement
from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more difficult
for investors to dispose of our common stock and cause a decline in the market
value of our stock.
Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
NASD SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
In addition to the "penny stock" rules described above, the NASD has
adopted rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low-priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the NASD believes that there is a high probability that
speculative, low-priced securities will not be suitable for at least some
customers. The NASD requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your
ability to buy and sell our stock and have an adverse effect on the market for
our shares.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This prospectus contains forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Reference is made in particular to the description of our plans and
objectives for future operations, assumptions underlying such plans and
objectives, and other forward-looking statements included in this prospectus.
Such statements may be identified by the use of forward-looking terminology such
as "may," "will," "expect," "believe," "estimate," "anticipate," "intend,"
"continue," or similar terms, variations of such terms or the negative of such
terms. Such statements are based on management's current expectations and are
subject to a number of actors and uncertainties, which could cause actual
results to differ materially from those described in the forward-looking
statements. Such statements address future events and conditions concerning our
plan of operation, liquidity and capital resources and accounting matters.
Actual results in each case could differ materially from those anticipated in
such statements by reason of factors such as future economic conditions, changes
in consumer demand, legislative, regulatory and competitive developments in
markets in which we operate, and other circumstances affecting anticipated
revenues and costs, as more fully disclosed in our discussion of risk factors
beginning on page 3.
We expressly disclaim any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
Additional factors that could cause such results to differ materially from those
described in the forward-looking statements are set forth in connection with the
forward-looking statements.
USE OF PROCEEDS
All of the net proceeds from the sale of the shares offered pursuant to
this prospectus will go to the stockholders who offer and sell them. We will not
receive any proceeds from the sale of shares by the selling stockholders. A
portion of the shares offered pursuant to this prospectus are issuable upon the
exercise of warrants. If these warrants are fully exercised by payment of the
exercise price in cash, we will receive gross proceeds of approximately
$2,500,000 (based on warrants to purchase 3,333,333 shares of common stock at an
exercise price of $0.75 per share), which will be used for general corporate
purposes, including working capital. The actual allocation of proceeds realized
from the exercise of these warrants will depend upon the amount and timing of
such exercises, our operating revenues and cash position at such time and our
working capital requirements. The outstanding warrants may not be exercised, at
the discretion of the holder.
10
PRICE RANGE OF COMMON STOCK
Our common stock, par value $.001, is currently quoted on the OTC
Bulletin Board under the symbol "RENG"; however, active trading market in our
common stock did not commence until February 2006. We completed a 4-for-1
forward stock split of our issued and outstanding shares of common stock on
February 20, 2006. The following table sets forth the high and low bid prices
for our common stock for the periods indicated. Such quotations are taken from
information provided by Exshare and reflect inter-dealer prices, without retail
mark-up, mark-down or commissions, and may not necessarily represent actual
transactions.
Bid
--------------
High Low
---- -----
Fiscal year ending December 31, 2006:
First Quarter.......................... $1.25 $0.25
Second Quarter......................... $1.02 $0.61
Third Quarter.......................... $1.14 $0.69
Fourth Quarter.......................... $1.065 $0.58
As of February 5, 2007, there were 44,585,824 shares of our common
stock outstanding owned by approximately 46 holders of record.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock.
We anticipate that any earnings will be retained for development and expansion
of our business and do not anticipate paying any cash dividends in the near
future. Our Board of Directors has sole discretion to pay cash dividends based
on our financial condition, results of operation, capital requirements,
contractual obligations and other relevant factors.
ABOUT THE OFFERING
On October 2, 2006, we entered into a Securities Purchase Agreement
with Cornell Capital Partners, LP for the private placement of secured
convertible debentures in the aggregate principal amount of $5 million. We
closed on the first $2 million on October 4, 2006; an additional $1.5 million
will be funded on the date a registration statement covering the resale of the
shares underlying the securities is filed with the Securities and Exchange
Commission (the "SEC"); and the final $1.5 million will be funded within three
business days after the registration statement is declared effective by the SEC.
The debentures accrue interest at a rate of 7.0% per annum, payable on the
maturity date, and payable in cash or in shares of our common stock, at our
option. The term of the debentures is three years, and the debentures will be
convertible at a conversion price equal to the lesser of $1.0536 or 90% of the
lowest daily volume weighted average price during the 15 trading days
immediately preceding the conversion date, subject to a weighted average
anti-dilution adjustment and other adjustments. As part of the transaction, we
issued to the purchaser warrants to purchase an aggregate of 8,166,666 shares of
our common stock, and we are obligated to issue to the purchaser an additional
warrant to purchase 1,000,000 shares of our common stock when the final tranche
is funded. The terms of the debentures and the warrants provide that no
conversions of the debentures and no exercises of the warrants shall be effected
to the extent that after giving effect to such conversion or exercise, as the
case may be, the holder, together with any affiliate thereof, would beneficially
own (as determined in accordance with Section 13(d) of the Exchange Act and the
rules promulgated thereunder) in excess of 4.99% of the number of shares of our
common stock outstanding immediately after giving effect to such conversion or
exercise, as the case may be.
As part of the private placement, we are registering an aggregate of
13,333,333 shares of our common stock issuable upon exercise of the warrants and
upon conversion of the debentures.
SELLING STOCKHOLDERS
The table below lists the selling stockholders and the shares being
registered for resale. The selling stockholders may sell all, some, or none of
their shares of our common stock in this offering. After the offering is
complete, assuming that the selling stockholders sell all of their shares of our
common stock offered for resale, the selling stockholders will not own any
shares of our common stock. The selling stockholders may not convert any of the
secured convertible debentures and may not exercise any of their warrants. Other
than as noted below, the selling stockholders have not had any material
relationship with us within the past three years.
11
Percentage of
Shares Shares
Beneficially Beneficially Shares to be Percentage of Shares
Owned Before Owned Before the Sold in the Beneficially Owned
the Offering Offering (1) Offering Before the Offering
_____________ ________________ ________________ ___________________
Cornell Capital Partners, L.P..... 2,341,682(2) 4.99% 13,333,333(3) 0%
--------- ----------
Totals............................ 2,341,682 13,333,333
========= ==========
- ----------------------------------------
(1) Applicable percentage of ownership is based on 44,585,824 shares of
common stock outstanding as of October 30, 2006, together with
securities exercisable or convertible into shares of common stock
within 60 days of October 30, 2006, for the selling stockholder.
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Shares of common stock subject to securities exercisable or
convertible into shares of common stock that are currently exercisable
or exercisable within 60 days of October 30, 2006 are deemed to be
beneficially owned by the person holding such securities for the
purpose of computing the percentage of ownership of such person, but
are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Note that affiliates are
subject to Rule 144 and Insider trading regulations - percentage
computation is for form purposes only.
(2) Includes 2,341,682 shares of common stock underlying convertible
debentures and warrants held by Cornell Capital Partners that are
convertible into shares of common stock within 60 days of October 30,
2006, such that the number of shares beneficially owned by Cornell
Capital Partners, upon giving effect to the conversion under the
convertible debentures and/or the exercise of the warrants, would not
cause the aggregate number of shares beneficially owned by Cornell
Capital Partners and its affiliates to exceed 4.99% of the total
outstanding shares of Radial Energy. As of October 30, 2006, Cornell
Capital Partners does not hold any shares of record. All investment
decisions of, and control of, Cornell Capital Partners are held by its
general partner, Yorkville Advisors, LLC. Mark Angelo, the managing
member of Yorkville Advisors, makes the investment decisions on behalf
of and controls Yorkville Advisors. The principal business address of
Cornell is 101 Hudson Street - Suite 3700, Jersey City, NJ 07303.
Cornell Capital Partners is not a registered broker-dealer or an
affiliate of a registered broke- dealer.
(3) Consists of shares of common stock underlying convertible debentures
and warrants.
PLAN OF DISTRIBUTION
Each selling stockholder and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on the over-the-counter bulletin board or any other stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. A
selling stockholder may use anyone or more of the following methods when selling
shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
12
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
or
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each selling stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each selling stockholder has
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the common stock.
The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company has agreed
to indemnify the selling stockholder against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each selling stockholder has advised us that they have not entered into any
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
selling stockholders.
We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the selling stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to our common stock for a period
of two business days prior to the commencement of the distribution. In addition,
the selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of shares of our common stock
by the selling stockholder or any other person. We win make copies of this
prospectus available to the selling stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale.
The selling stockholders may not sell the common stock included in this
offering to cover short sales made prior to effectiveness of the registration
statement. Upon closing the purchase of the secured convertible debentures, the
selling stockholders represented and warranted to the company that they did not
have an open short position in our common stock.
13
DESCRIPTION OF BUSINESS
CORPORATE HISTORY
Our company was incorporated in the State of Nevada on June 30, 2000,
under the name of "All Printer Supplies.com." On April 17, 2003, we changed our
name to "BV Pharmaceuticals, Inc." and became a provider of information and
services in the areas of personal DNA collection, analysis, profiling, banking
and DNA profile database maintenance. Effective as of April 3, 2006, through a
statutory merger with our wholly owned subsidiary in which we were the surviving
corporation, we changed our name to "Radial Energy Inc."
GENERAL
We are an exploration stage company that has not generated revenues
from our current operations in the oil and gas industry. There is no historical
financial information about Radial Energy upon which to base an evaluation of
our performance. We cannot guarantee we will be successful in our new core
business or in any business operations. Our business is subject to risks
inherent in the establishment of a new business enterprise, including limited
capital resources and in the exploration of oil and gas reserves.
Future financing may not be available on acceptable terms. If financing
is not available on satisfactory terms, we may be unable to continue with our
current business plan.
BUSINESS
In March 2006, we began a new business plan concentrating on the
acquisition, exploration, development, and production of domestic and
international oil and gas projects. Radial Energy's primary focus is on
identifying previously drilled but subsequently abandoned wells that encountered
and/or tested live oil or natural gas indicating the presence of marketable
hydrocarbons, reservoir, and trap. As of the date of filing of this report, we
have acquired working interests in projects in South America and in Texas and
are continuing to explore other opportunities in North and Latin America.
BLOCK 100, HUAYA ANTICLINE, PERU
Pursuant to a Letter of Intent dated April 19, 2006, and a related
Joint Operating Agreement effective as of May 11, 2006, we have acquired rights
to a 20% working interest and 18% revenue interest in the Huaya Anticline
Project, Block 100 oil prospect located in the Ucayali Basin, Peru. The project
encompasses a structural closure of approximately 500 acres, with the potential
for up to 41 well locations. We acquired the interest in the Block 100 project
from Ziegler-Peru, Inc., an American company based in Texas, which sold the
interest to us and will retain a 10 percent interest. The majority interest is
owned by the concession-holder, Compania Consultora de Petroleo, S.A., a
consulting company based in Lima, Peru. While Compania Consultora is the
operator of record for the concession, Ziegler-Peru will act as contract driller
and operator for the block.
On January 31, 2007, we entered into an agreement with Compania
Consultora de Petroleo, S.A. and Ziegler-Peru, Inc., which modified certain
terms of our prior agreement. The January 2007 agreement increased the interest
we acquired in the Huaya Anticline Project from 20% to 23 percent. As
consideration for this interest, which is only for one well, we agreed to pay a
total of $2,100,000, which funds also cover the acquisition of certain equipment
to be used for drilling, testing, and evaluation of the first well. As of the
date of the filing of this prospectus, we have paid in full our total financial
obligation for the first well. After drilling of the first well is complete, we
will have the option to proceed with the project by funding the drilling,
testing and evaluation of another two wells on the property.
After drilling of the first well is complete, we will have the option
to proceed with the project by funding the drilling, testing and evaluation of
another two wells on the property for an additional $1,550,000, which funds are
expected to cover the acquisition and installation of all production facilities
required to bring the hydrocarbons produced to market. Thereafter, we will have
the option to pay for our 23% working interest share of the development and
operation of the project. In the event Radial Energy and the other participating
parties decide that the project is not feasible, the equipment acquired will be
sold and we will be entitled to 67% of the proceeds. In addition, we have agreed
to pay 10% of any future revenues from the Huaya Anticline Project to cover all
reasonable costs to date above the sum of $1,050,000 relating to the purchase of
equipment, drilling, and contracting expenses incurred by Ziegler-Peru until
this amount is paid in full.
A third-party geological assessment conducted by Gustavson Associates
of Boulder, Colorado, a consultant contracted by Radial Energy, classified the
Block 100 project as proved undeveloped with 2.9 million barrels of oil net to
Radial. While management believes this prospect provides the opportunity to
discover and develop a field with production potential, there can be no
assurance the prospect will achieve such potential. The first well is currently
being drilled and is expected to be completed in February 2007, and if
successful, production is anticipated by March 31, 2007.
14
CHEROKEE COUNTY, TEXAS
Pursuant to an Assignment Agreement dated June 27, 2006, we acquired
all of the rights and obligations of Pin Petroleum Partners Ltd., a Canadian
company, under three leasehold assignment agreements to properties located in
Cherokee County, Texas (collectively, the "Cherokee Agreements") with Skyline
Energy LLC, a company based in Texas. The prospects involve three separate
exploratory oil and gas prospects, known as the Junction Prospect, the Northwest
Jacksonville Prospect, and the Highway 79 Prospect. As consideration for the
assignment, we agreed to pay Pin Petroleum Partners a total of $700,000 by
November 17, 2006 along with a four percent overriding royalty interest from our
share of net revenue interest. Prior to the assignment, Pin Petroleum Partners
had provided to the operator of the prospects, MLC Operating, LP, $443,790 to
cover the original estimates for the drilling and completion costs for the
initial well on each of the three prospects. This pre-payment by Pin Petroleum
Partners has been assigned to Radial Energy. The funds will cover our share of
the estimated capital expenditures to drill the first test wells on each of the
three prospects. If one or more of these initial wells results in a successful
discovery, the operator may request additional funds to cover completion costs
if the original funds do not cover the current costs of completion. For each of
the three prospects, we hold a 30% working interest before payout of initial
investment, and a 22.5% working interest after payout, with payout determined on
a project basis.
The Junction Prospect is located in northwestern Cherokee County,
approximately five miles southwest of Jacksonville, Texas. This oil and natural
gas prospect's leasehold covers approximately 500 acres. The Northwest
Jacksonville Prospect leasehold covers approximately 350 acres located in
northern Cherokee County. The Highway 79 Prospect is located in northwestern
Cherokee County, one mile west of Jacksonville, Texas, and the prospect leases
cover approximately 340 net acres. While calculations based on preliminary
geological analysis, reservoir studies and interpretation estimate that the
prospects have oil and natural gas production potential, such potential may not
be achieved. We have begun drilling and testing in the prospects. Our drilling
and testing in the Highway 79 Prospect resulted in an unsuccessful test and we
will not continue to explore in that prospect. We will continue to explore in
the Junction Prospect and the Jacksonville Prospect.
BOSQUE BLOCK, MIDDLE MAGDALENA VALLEY OF COLOMBIA
Pursuant to a binding letter of intent dated August 23, 2006, Maxim
Well Services Ltd. ("Maxim"), a company with its principal place of business in
Bogota, Colombia, and we agreed to negotiate and enter into a joint operating
agreement, the purpose of which is for Radial Energy to acquire a 20% working
interest in the right to explore and develop oil reserves and production on the
9,000 hectare (22,239 acre) "Bosque Block" located in prolific Middle Magdalena
Valley of Colombia.
We will be required to contribute $2.2 million in cash in stages
beginning on execution of the joint operating agreement. Three Hundred Fifty
Thousand Dollars ($350,000) will be due upon signing the joint operating
agreement and another $350,000 will be due sixty (60) days following the signing
of the joint operating agreement. The remaining $1,500,000 will be due 15 days
following any capital call made by Maxim at any time following the execution of
the joint operating agreement.
Until such time that we recoup $1,500,000 of our investment, we will
receive a 33.33% participation in distributions. Following recoupment of $1.5
million of our investment, our interest will remain at 20 percent.
The parties intend to enter into the joint operating agreement by
November 22, 2006. If the parties fail to enter into the joint operating
agreement by November 22, 2006, then Maxim will have no obligation to enter into
the joint operating agreement or accept the investment from us on the terms
expressed in the letter of intent. Further, if we fail to properly execute the
joint operating agreement, we will be liable to Maxim for a termination fee of
up to $200,000 as follows: (a) $50,000 if we terminate at any time on or before
the date the Colombian government issues the appropriate authority to Maxim to
begin operations at the site, (b) a total of $100,000 if we terminate following
the date the Colombian government issues such authority, and (c) a total of
$200,000 if we terminate more than thirty (30) days following the date the
Colombian government issues such authority.
ONGOING ACTIVITIES
Additionally, management is currently investigating and in some cases
is negotiations with various parties in both the U.S. and Colombia to acquire
both producing and prospective assets, but as of the date of this report had not
reached formal agreement on any of these opportunities.
15
PROPERTIES
The agreements relating to the Block 100 prospect entitle us to a 20%
working interest in oil and gas leases covering approximately 500 acres in the
Huaya Anticline Project, Block 100 oil prospect located in the Ucayali Basin,
Peru. The leases have a primary term of 30 years from and after March 2004.
Pursuant to the Assignment Agreement and our resulting rights under the
Cherokee Agreements, for each of the Junction Prospect, the Northwest
Jacksonville Prospect, and the Highway 79 Prospect, we hold a 30% working
interest before payout of initial investment, and a 22.5% working interest after
payout. The leases have primary terms of three years and are renewable so long
as drilling operations occur during the primary terms.
Our principal office is located at 1200 Smith Street, Suite 1600,
Houston, Texas 77002. The office is part of a shared business center and
includes two private offices. We rent the 400 square foot space for $4,500 per
month. The initial term of our lease expires on August 31, 2007 and the lease
then becomes month-to-month.
Our company rentals additional office space located at 1313 East Maple
Street, Suite 223, Bellingham, Washington 98225. The office is part of a new
office complex that offers a full range of office services. We rent a single
office on a month-to-month lease at a rate of approximately $800 per month in
rent and incidentals.
MANAGEMENT'S PLAN OF OPERATION
PLAN OF OPERATION
Our business plan is to identify, acquire, and develop oil and gas
exploration and development opportunities throughout North America and Latin
America, with a primary focus on identifying previously drilled but subsequently
abandoned exploratory wells that encountered and/or tested live oil or natural
gas. We are flexible in our approach and will pursue opportunities as they arise
both in North America and in countries throughout Latin America that are
friendly to foreign investments, with factors such as lower production taxes and
positive government incentives. We plan to become the operator of record in the
majority of our future projects. To date, execution of our business plan has
largely focused on acquiring prospective rights to oil and gas leases and
properties. We intend to establish a going forward exploration and development
plan.
Since inception, we have funded our operations primarily from the
private placement of common stock and warrants. Although we expect that, during
the next 12 months, our operating capital needs will be met from our current
economic resources and by additional private capital stock transactions, the
funds required may not be available on terms acceptable to us or at all. In
October 2006, we raised $5,000,000 through a convertible debenture with Cornell
Capital Partners LP, of which we have received $3,500,000 to date and expect to
receive an additional $1,500,000 in March 2007. The funds will be used to fund
the Huaya Block 100 project in Peru, the NW Jacksonville and Junction prospects
in Texas, and the Boques Block in Columbia. Further, management may use these
funds to evaluate additional projects and/or pay general administration and
overhead expenses. We expect that the convertible debenture financing will allow
us to fund our operations through March 2007 and additional funds may be
required to complete the exploration or development of our prospects. If we are
unable to raise sufficient funds on terms acceptable to us, we may be unable to
complete our business plan. If equity financing is available to us on acceptable
terms, it could result in additional dilution to our stockholders.
As of the date of this prospectus, we have yet to generate any revenues
from operations of our new core business. From inception to September 30, 2006,
we have accumulated losses of $1,970,471 and expect to incur further losses in
the development of our business, all of which casts doubt about Radial Energy's
ability to continue as a going concern. Our ability to continue as a going
concern is dependent upon our ability to generate future profitable operations
and/or to obtain the necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they become due.
COMPETITION
The oil and gas industry is intensely competitive. We compete with
numerous individuals and companies, including many major oil and gas companies,
which have substantially greater technical, financial, and operational resources
and staffs. Accordingly, there is a high degree of competition for desirable oil
and gas leases, suitable properties for drilling operations, and necessary
drilling equipment, as well as for access to funds. There are other competitors
that have operations in South America and the Texas area and the presence of
these competitors could adversely affect our ability to acquire additional
leases and rights to properties.
GOVERNMENT AND ENVIRONMENTAL REGULATION
Our oil and gas operations are subject to various United States
federal, state, and local governmental regulations. Matters subject to
regulation include discharge permits for drilling operations, drilling and
abandonment bonds, reports concerning operations, the spacing of wells, and
pooling of properties and taxation. From time to time, regulatory agencies have
imposed price controls and limitations on production by restricting the rate of
flow of oil and gas wells below actual production capacity in order to conserve
supplies of oil and gas. The production, handling, storage, transportation and
disposal of oil and gas, by-products thereof, and other substances and materials
produced
16
or used in connection with oil and gas operations are also subject to regulation
under federal, state, provincial and local laws and regulations relating
primarily to the protection of human health and the environment. To date,
expenditures related to complying with these laws, and for remediation of
existing environmental contamination, have not been significant in relation to
the results of operations of our company. The requirements imposed by such laws
and regulations are frequently changed and subject to interpretation, and we are
unable to predict the ultimate cost of compliance with these requirements or
their effect on our operations.
NUMBER OF EMPLOYEES
From our inception through the period ended December 31, 2006, we have
relied on the services of outside consultants for services and a limited number
of full-time employees. As of the date of the filing of this prospectus, we have
two full-time employees, our Chief Executive Officer and our Chief Operating
Officer. We do not expect any material changes in the number of employees over
the next 12 months. However, if we are successful in our initial and any
subsequent drilling programs, we may retain additional employees. We have relied
on, and will continue to rely on, outside consultants for services.
PRODUCT RESEARCH AND DEVELOPMENT
We do not anticipate performing research and development for any
products during the next 12 months.
ACQUISITION OR DISPOSITION OF PLANT AND EQUIPMENT
We do not anticipate the sale of any significant property, plant or
equipment during the next twelve months. We do not anticipate the acquisition of
any significant property, plant or equipment during the next 12 months, other
than computer equipment and peripherals used in our day-to-day operations. We
believe we have sufficient resources available to meet these acquisition needs.
OFF BALANCE SHEET ARRANGEMENTS
We do not maintain off-balance sheet arrangements nor do we participate
in non-exchange traded contracts requiring fair value accounting treatment.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings. From
time to time, we may receive claims of and become subject to commercial
litigation related to the conduct of our business. Such litigation could be
costly and time consuming and could divert our management and key personnel from
our business operations. The uncertainty of litigation increases these risks. In
connection with such litigation, we may be subject to significant damages or
equitable remedies relating to the operation of our business. Any such
litigation may materially harm our business, results of operations and financial
condition.
17
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding our
executive officers and directors as of February 5, 2007:
Date first elected
Name Age Position or appointed
- ---- --- -------- ------------------
G. Leigh Lyons 48 President, Chief Executive Officer, February 10, 2006
Chief Financial Officer, Secretary,
and Director
Omar Hayes 41 Chief Operating Officer and Director June 1, 2006
Our directors are elected at each annual general meeting and hold office until
the next annual general meeting or until their successors are appointed.
BUSINESS EXPERIENCE
The following is a brief account of the education and business
experience during at least the past five years of each director and executive
officer, indicating the principal occupation during that period, and the name
and principal business of the organization in which such occupation and
employment were carried out.
G. LEIGH LYONS, PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER,
SECRETARY, AND DIRECTOR
Mr. Lyons has over 22 years experience in the domestic and
international oil and gas sector, specializing in general management, corporate
governance, strategic planning, acquisitions and project management. He recently
founded Sound Energy Advisors LLC, a consulting company dedicated to providing
corporate management and governance services to start-up and emerging energy
companies. Mr. Lyons has been a director of Benem Ventures Inc., an oil and gas
company based in Canada, since December 2005 (BNM.H: NEX Exchange). From August
2005 to May 2006, Mr. Lyons was the Chief Executive Officer and a director of
Digital Ecosytems Corp. (OTC BB: DGEO), a global oil and gas exploration company
specializing in acquiring unconventional oil and gas prospects in North America
and Australia. From 2000 to 2005, Mr. Lyons was Chief Operating Officer and
Project Director for Gas TransBoliviano S.A., a Shell/Enron controlled gas
transmission company headquartered in Bolivia. Other positions held by Mr. Lyons
include President and Director of Can West Exploration Inc., a junior
exploration company operating in Colombia (1998-2000), Vice President of
Exploration and Production for Compania General de Combustibles S.A. in Buenos
Aires, Argentina (1993-1998), and Vice President of Corporate Development for
Global Natural Resources Inc., an oil and gas company based in Houston, Texas
(1989-1993). Mr. Lyons received his Bachelor of Arts in Earth Science from the
University of California, Santa Cruz in 1984 and is an Alumnus of the Harvard
Business School having completed the Advanced Management Program in 2004.
OMAR HAYES, CHIEF OPERATING OFFICER
Prior to joining Radial Energy, Mr. Hayes had a nine-year career with
Transredes S.A (TRSA) and Gas TransBoliviano S.A. (GTB), both Shell/Enron joint
ventures located in Santa Cruz, Bolivia, and companies that together transport
and export through their systems the majority of the oil and gas produced in
Bolivia. From May 2005 to May 2006, Mr. Hayes was Vice President of Operations
for GTB. Prior to that assignment, Mr. Hayes was the Gas Systems Manager for
TRSA in charge of all operations on the company's gas transmission and
distribution system from June 2003 to May 2005; Project Manager for TRSA's $125
million dollar GTB system gas compression expansion project from June 2001 to
May 2003; and was TRSA's Manager of Gas System Expansion from May 2001 to
September 2002. Prior to 2001, Mr. Hayes held various project engineering and
management positions. Mr. Hayes received his Master of Science in Mechanical
Engineering as part of a Fulbright Scholarship to Michigan State University in
1997. He also received a Master in Business Administration at the Universidad
Catolica Boliviana in 2000, and a BS in Mechanical Engineering from the
Universidad Mayor Real y Pontificia de San Francisco Xavier de Chuquisaca in
1989. He has attended many executive level programs at several universities
including the Oxford Princeton Programme (UK), Harvard Business School and
Stanford University.
FAMILY RELATIONSHIPS
There are no family relationships between any of our directors or
executive officers.
18
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of our directors, executive officers, promoters or control persons
have been involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that
time;
2. any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and
other minor offenses);
3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed,
suspended, or vacated.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation of our Chief Executive Officer and each of our other most highly
compensated executive officers who earned more than $100,000 for the fiscal
years ended December 31, 2005, 2004 and 2003.
SUMMARY EXECUTIVE COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------------- ---------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS/SARS
- -------------------------------- ------- -------- --------- ------------ ------------ -------------
G. Leigh Lyons(1)............... 2006 $180,000 -- $14,400 -- --
President, Chief Executive
Officer, Chief Financial
Officer, Secretary &
Director
Omar Hayes(2)................... 2006 $132,000 -- $14,400 $1,125,000 --
Chief Operating Officer &
Director
Art Bandenieks(1)(3)............ 2005 -- -- -- -- --
Former President, Chief 2004 -- -- -- -- --
Executive Officer,
Secretary & Director 2003 -- -- -- -- --
Lee Southern(2)(3).............. 2005 -- -- -- -- --
Former Treasurer, Chief 2004 -- -- -- -- --
Financial Officer &
Director 2003 -- -- -- -- --
- --------------------------------
(1) On February 10, 2006, Bandenieks resigned as a director, and as our
President, Chief Executive Officer, and Secretary, and G. Leigh Lyons
was appointed as director, and as our President, Chief Executive
Officer, and Secretary, to replace the vacancies created by Mr.
Bandenieks's resignation. In connection with his appointment, Mr. Lyons
acquired 2,672,000 shares of our common stock from Mr. Bandenieks for
which he paid $65. Mr. Lyons' employment agreement, which initial term
commenced in April 2006, provides for an annual base salary of $180,000
per year, plus reimbursement of all company-related expenses incurred.
In addition, Mr. Lyons is also eligible for a bonus and a stock grant,
to be granted at the discretion of the Board of Directors, plus health
benefits of approximately $800 per month and an auto allowance of $400
per month. Since Mr. Lyons joined our company after the completion of
our last fiscal year, we are providing summary compensation information
based on the terms of his employment agreement for the entire fiscal
year 2006 so as to provide information regarding our Chief Executive
Officer as of the date of this prospectus.
19
(2) On April 17, 2006, Lee Southern resigned as a director, and as our
Treasurer and Chief Financial Officer, and Mr. Lyons was appointed as
our Treasurer and Chief Financial Officer. On June 1, 2006, Omar Hayes
was appointed to serve as our Chief Operating Officer. At the same
time, Mr. Hayes was also appointed as a director, filling the vacancy
created by Mr. Southern's resignation. Mr. Hayes' employment agreement,
which initial term commenced in June 2006, provides for an annual base
salary of $132,000, plus reimbursement of all company-related expenses
incurred. In addition, Mr. Hayes is also eligible for a bonus and a
stock grant, to be granted at the discretion of the Board of Directors,
plus health benefits of approximately $800 per month and an auto
allowance of $400 per month. Since Mr. Hayes joined our company after
the completion of our last fiscal year, we are providing summary
compensation information based on the terms of his employment agreement
for the entire fiscal year 2006 so as to provide information regarding
our Chief Operating Officer as of the date of this prospectus.
(3) At the end of our last completed fiscal year, our Chief Executive
Officer was Art Bandenieks, who was also our then President, Secretary,
and a director, and our Chief Financial Officer was Lee Southern, who
was also our then Treasurer and a director. We did not pay any
executive compensation since our inception for their services.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
We do not have any long-term incentive plans.
EMPLOYMENT AGREEMENTS
We have employment agreements with our executives. In addition to
salary and benefit provisions, the agreements include defined commitments in the
event that the executives terminate the employment with or without cause.
We entered into an employment agreement with G. Leigh Lyons in
connection with Mr. Lyons' appointment as our Chief Executive Officer. The
employment agreement has an initial term of three years, commencing on April 1,
2006, and will be extended for additional one-year terms unless either party
elects to terminate the agreement at the end of the initial term or any
additional terms before the expiration thereof. Pursuant to the terms of the
agreement, we agreed to pay Mr. Lyons an annual base salary of $180,000, plus
reimbursement of all company-related expenses incurred. Mr. Lyons also is
eligible for a bonus and a stock grant, to be granted at the discretion of the
Board of Directors, and is entitled to health benefits of approximately $800 per
month and an auto allowance of $400 per month. We may terminate the agreement
for "cause," as such term is defined in the agreement, upon 30 days' prior
written notice, and Mr. Lyons may terminate the employment agreement for "good
reason," as such term defined in the agreement, upon 30 days' prior written
notice. If the agreement is terminated by Mr. Lyons for "good reason" or if we
terminate the agreement for "cause," then we will be obligated pay Mr. Lyons a
lump sum amount equal to 250% of Mr. Lyon's annual salary.
We entered into an employment agreement with Omar Hayes in connection
with Mr. Hayes' appointment as our Chief Operating Officer. The employment
agreement has an initial term of three years, commencing on June 1, 2006, and
will be extended for additional one-year terms unless either party elects to
terminate the agreement at the end of the initial term or any additional terms
before the expiration thereof. Pursuant to the terms of the agreement, we agreed
to pay Mr. Hayes an annual base salary of $132,000, plus reimbursement of all
company-related expenses incurred. Mr. Hayes also is eligible for a bonus and a
stock grant, to be granted at the discretion of the Board of Directors, and is
entitled to health benefits of approximately $800 per month and an auto
allowance of $400 per month. We may terminate the agreement for "cause," as such
term is defined in the agreement, upon 30 days' prior written notice, and Mr.
Hayes may terminate the employment agreement for "good reason," as such term
defined in the agreement, upon 30 days' prior written notice. If the agreement
is terminated by Mr. Hayes for "good reason" or if we terminate the agreement
for "cause," then we will be obligated pay Mr. Hayes a lump sum amount equal to
250% of Mr. Hayes' annual salary.
COMPENSATION OF DIRECTORS
Our directors were not compensated for their service during fiscal year
2005, and we do not currently compensate our directors in cash for their service
as members of our board of directors. We do reimburse our directors for
reasonable expenses in connection with attendance at board meetings.
20
COMMITTEES OF THE BOARD OF DIRECTORS
We do not have standing audit, nominating or compensation committees of
the Board of Directors, or committees performing similar functions, and
therefore our entire Board of Directors performs such functions. We are not
currently listed on any national exchange and are not required to maintain such
committees by any self-regulatory agency. We do not believe it is necessary for
our Board of Directors to appoint such committees because the volume of matters
that come before our Board of Directors for consideration permits each director
to give sufficient time and attention to such matters to be involved in all
decision making. All directors participate in the consideration of director
nominees. We do not have a policy with regard to attendance at board meetings.
We do not have a policy with regard to consideration of nominations of
directors. We accept nominations for directors from our security holders. There
is no minimum qualification for a nominee to be considered by our directors. All
of our directors will consider any nomination and will consider such nomination
in accordance with his or her fiduciary responsibility to the company and its
shareholders.
Security holders may send communications to our Board of Directors by
writing to Radial Energy Inc., 1200 Smith Street, Suite 1600, Houston, Texas
77002, attention Board of Directors or any specified director. Any
correspondence received at the foregoing address to the attention of one or more
directors is promptly forwarded to such director or directors.
RELATED PARTY TRANSACTIONS
We have not been a party to any transaction, proposed transaction, or
series of transactions in which the amount involved exceeds $60,000, and in
which, to our knowledge, any of our directors, officers, five percent beneficial
security holders, or any member of the immediate family of the foregoing persons
has had or will have a direct or indirect material interest.
INDEMNIFICATION
Our bylaws provide indemnification by the company of any individual
made a party to proceeding because he is or was an officer, director, employee
or agent of the company against liability incurred in the proceeding, to the
fullest extent permissible under the laws of Nevada. The bylaws provide that the
company advance the expenses of officers and directors incurred in defending any
such proceeding, provided that the company received an undertaking from such
person to repay the expenses advanced if it is ultimately determined that he is
not entitled to be indemnified.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC that such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERS / MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock held as of February 5, 2007, by:
o each of the named executive officers;
o each director;
o all of our current directors and executive officers as a group;
and
o each person known to us to be the beneficial owner of more than
5% of the outstanding shares of our common stock.
For purposes of this table, a person is deemed to be the "beneficial
owner" of the number of shares of common stock that such person has the right to
acquire within 60 days of February 5, 2007, through the exercise of any option,
warrant or right, through the conversion of any security, through the power to
revoke a trust, discretionary account, or similar arrangement, or through the
automatic termination of a trust, discretionary account or similar arrangement.
21
Percentage ownership is based on an aggregate of 44,585,824 shares of
our common stock outstanding on February 5, 2007. The table is based upon
information provided by officers, directors and principal stockholders in
documents filed with the Commission. Except as otherwise indicated, and subject
to applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all of the shares of our common
stock beneficially owned by them. Unless otherwise indicated, the address for
each person is c/o Radial Energy Inc., 1200 Smith Street, Suite 1600, Houston,
Texas 77002.
Name of Beneficial Owner Number of Shares Percent of Class
- -------------------------------- ---------------- ----------------
DIRECTORS AND EXECUTIVE OFFICERS:
G. Leigh Lyons 2,672,000 5.99%
Omar Hayes 1,500,000 3.36%
Art Bandenieks(1) 0 *
Lee Southern(1) 0 *
All directors and officers as a group 4,172,000 9.36%
(2 persons)(1)
- -----------------
* Less than 1%
(1) As discussed above, Mr. Bandenieks resigned as director and from his
executive office positions effective on February 10, 2006, and Mr.
Southern resigned as a director and from his executive office positions
effective on April 17, 2006. Since they are not executive officers and
directors of Radial Energy as of October 30, 2006, for purposes of the
beneficial ownership table above, they are not included in all
directors and executive officers as a group but are listed to show
their ownership of the company individually. Mr. Bandenieks's address
is 2876 - 252 Street, Aldergrove, British Columbia, Canada, V4W 2R2.
Mr. Southern's address is 2020 Bellevue Ave., West Vancouver, British
Columbia, Canada, V7V 1B8.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 75,000,000 shares of common
stock, $0.001 par value. Our common stock is the only class of voting securities
issued and outstanding. Each share of common stock is entitled to one vote. As
of February 5, 2007 (after adjustment for the 4-for-1 forward stock split and
the return to our treasury for cancellation of 29,000,000 shares of our common
stock), there were 44,585,824 shares of our common stock issued and outstanding.
LEGAL MATTERS
The validity of the shares of common stock offered in this Prospectus
will be passed upon by Greenberg Traurig, LLP, Costa Mesa, California.
EXPERTS
Amisano Hanson, an independent registered public accounting firm, has
audited our financial statements for the years ended December 31, 2005 and 2004,
as stated in their report appearing herein, and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to certain informational requirements of the Exchange
Act. As a result, we file annual, quarterly and current reports, and other
information with the SEC. We are not required to deliver an annual report to our
stockholders but voluntarily send to our stockholders our annual report on Form
10-KSB in connection with our annual meeting, which includes audited financial
statements. Here are ways you can reach and obtain copies of this information:
WHAT IS AVAILABLE WHERE TO GET IT
Paper copies of information SEC's Public Reference Room
100 F Street, N.E.
Washington, D.C. 20549
On-line information, free of charge SEC's Internet website at
http://www.sec.gov
Information about the SEC's Call the SEC at 1-800-SEC-0330
Public Reference Rooms
This prospectus is part of a Registration Statement on Form SB-2 we
filed with the SEC. This prospectus does not contain all of the information set
forth in the registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. You can get a copy of the
registration statement from the sources listed above.
22
RADIAL ENERGY INC.
INDEX TO FINANCIAL INFORMATION
Page No.
--------
Report of Independent Registered Certified Public Accountants.... F-2
Balance Sheets as of December 31, 2005 and 2004.................. F-3
Statements of Operations for the Years Ended December 31, 2005 and
2004 and for the period from June 30, 2000 (date of inception) to
December 31, 2005............................................. F-4
Statements of Cash Flows for the Years Ended December 31, 2005 and
2004 and for the period from June 30, 2000 (date of inception) to
December 31, 2005............................................. F-5
Statements of Stockholders' Equity (Deficiency) for the period from
June 30, 2000 (date of inception) to December 31, 2005........ F-6
Notes to Financial Statements.................................... F-7
Balance Sheets as of September 30, 2006, and December 31, 2005... F-12
Interim Statement of Operations for the three months and nine months
ended September 30, 2006 and 2005 and for the period from June 30, 2000
(date of inception) to September 30, 2006..................... F-13
Interim Statement of Cash Flows for the nine months ended September 30, 2006
and 2005 and for the period from June 30, 2000 (date of inception)
to September 30, 2006 ........................................ F-14
Interim Statement of Stockholders' Equity (Deficiency) for the period
June 30, 2000 (Date of Inception) to September 30, 2006 ...... F-15
Notes to Financial Statements.................................... F-17
BV PHARMACEUTICAL, INC.
(A Development Stage Company)
REPORT AND FINANCIAL STATEMENTS
December 31, 2005 and 2004
(STATED IN US DOLLARS)
AMISANO HANSON
A PARTNERSHIP OF INCORPORATED PROFESSIONALS CHARTERED ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders,
BV Pharmaceutical, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of BV Pharmaceutical, Inc. (A
Development Stage Company) as of December 31, 2005 and 2004 and the related
statements of operations, cash flows and stockholders' equity (deficiency) for
each of the years then ended and for the period June 30, 2000 (Date of
Inception) to December 31, 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, these financial statements referred to above present fairly, in
all material respects, the financial position of BV Pharmaceutical, Inc. as of
December 31, 2005 and 2004 and the results of its operations and its cash flows
for each of the years then ended and for the period June 30, 2000 (Date of
Inception) to December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements referred to above have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company is in the development stage, and has
no established source of revenue and is dependent on its ability to raise
capital from stockholders or other sources to sustain operations. These factors,
along with other matters as set forth in Note 1, raise substantial doubt that
the Company will be able to continue as a going concern. Management plans in
regard to their planned financing and other matters are also described in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Vancouver, Canada "AMISANO HANSON"
February 28, 2006 Chartered Accountants
750 WEST PENDER STREET, SUITE 604 TELEPHONE: 604-689-0188
VANCOUVER CANADA FACSIMILE: 604-689-9773
V6C 2T7 E-MAIL: amishan@telus.net
F-2
BV PHARMACEUTICAL, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 2005 and 2004
(STATED IN US DOLLARS)
2005 2004
_________ _________
ASSETS
Current
Cash $ 1,211 $ 24,964
Accounts receivable 1,000 2,000
_________ _________
$ 2,211 $ 26,694
========= =========
LIABILITIES
Current
Accounts payable and accrued liabilities $ 8,435 $ 8,517
Unearned revenue 7,500 -
Current portion of convertible debentures - Note 3 - 50,000
_________ _________
15,935 58,517
Convertible debentures - Note 3 - 4,792
_________ _________
15,935 63,309
_________ _________
STOCKHOLDERS' DEFICIENCY
Capital stock - Notes 3, 4 and 7 Authorized:
75,000,000 common stock, $0.001 par value
Issued:
151,065,824 common shares (2004:149,920,400) 151,066 149,920
Additional paid-in capital 6,180 (49,945)
Deficit accumulated during the development stage (170,970) (136,320)
_________ _________
(13,724) (36,345)
_________ _________
$ 2,211 $ 26,964
========= =========
Nature and Continuance of Operations - Note 1
Subsequent Events - Notes 4 and 7
SEE ACCOMPANYING NOTES
F-3
BV PHARMACEUTICAL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
for the years ended December 31,
2005 and 2004 and for the period from June 30, 2000
(Date of Inception) to December 31, 2005
(STATED IN US DOLLARS)
June 30, 2000
(Date of
Years ended Inception) to
December 31, December 31,
2005 2004 2005
____________ ____________ _____________
Revenue
License fees $ - $ 14,000 $ 24,000
Other income 480 1,258 1,738
____________ ____________ _____________
480 15,258 25,738
____________ ____________ _____________
Administrative expenses
Advertising and promotion - - 1,001
Bad debt 1,000 - 1,000
Consulting fees 425 9,400 48,497
Filing fees 7,704 4,426 12,455
Interest and bank charges 2,609 5,005 7,614
Investor relations - - 9,996
Marketing research and development - 10,000 10,000
Office and miscellaneous 5,727 5,044 12,873
Professional fees 17,392 16,786 40,638
Rent - - 505
Intellectual property acquisition costs - - 50,000
Website maintenance 273 1,050 2,129
____________ ____________ _____________
35,130 51,711 196,708
____________ ____________ _____________
Net loss for the period $ (34,650) $ (36,453) $ (170,970)
============ ============ =============
Basic loss per share $ (0.00) $ (0.00)
============ ============
Weighted average number of shares outstanding
- Notes 2 and 4 150,353,464 149,920,400
============ ============
SEE ACCOMPANYING NOTES
F-4
BV PHARMACEUTICAL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the years ended December 31,
2005 and 2004 and for the period from June 30, 2000
(Date of Inception) to December 31, 2005
(STATED IN US DOLLARS)
June 30, 2000
(Date of
Years ended Inception) to
December 31, December 31,
2005 2004 2005
_________ _________ _____________
Cash Flows used in Operating Activities
Net loss for the period $ (34,650) $ (36,453) $ (170,970)
Changes in non-cash working capital balances
balances related to operations:
Accounts receivable 1,000 (2,000) (1,000)
Accounts payable and accrued liabilities (82) 4,917 8,435
Unearned revenue 7,500 - 7,500
_________ _________ __________
(26,232) (33,536) (156,035)
_________ _________ __________
Cash flows from Financing Activities
Capital stock issued - - 99,975
Convertible debentures 2,479 54,792 57,271
_________ _________ __________
2,479 54,792 157,246
_________ _________ __________
Increase (decrease) in cash during the period (23,753) 21,256 1,211
Cash, beginning of the period 24,964 3,708 -
_________ _________ __________
Cash, end of the period $ 1,211 $ 24,964 $ 1,211
========= ========= ==========
Non-cash Transaction - Note 8
SEE ACCOMPANYING NOTES
F-5
BV PHARMACEUTICAL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIENCY) for the period June 30, 2000 (Date
of Inception) to December 31, 2005
(STATED IN US DOLLARS)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
*Shares **Par Value Capital Stage Total
___________ ___________ __________ ___________ _________
Capital stock subscribed pursuant to an offering
memorandum for cash - at $0.0000002 122,172,000 $ 122,172 $ (121,968) $ - $ 204
___________ _________ __________ ___________ _________
Balance, December 31, 2000 122,172,000 122,172 (121,968) - 204
Capital stock issued pursuant to a private
placement - at $0.0025 27,108,400 27,108 40,663 - 67,771
- at $0.05 160,000 160 7,840 - 8,000
Net loss for the year - - - (69,885) (69,885)
___________ _________ __________ ___________ _________
Balance, December 31, 2001 149,440,400 149,440 (73,465) (69,885) 6,090
Capital stock issued pursuant to a private
placement - at $0.05 480,000 480 23,520 - 24,000
Net loss for the year - - - (30,090) (30,090)
___________ _________ __________ ___________ _________
Balance, December 31, 2002 144,920,400 149,920 (49,945) (99,975) -
Net income for the year - - - 108 108
___________ _________ __________ ___________ _________
Balance, December 31, 2003 149,920,400 149,920 (49,945) (99,867) 108
Net loss for the period - - - (36,453) (36,453)
___________ _________ __________ ___________ _________
Balance, December 31, 2004 149,920,400 149,920 (49,945) (136,320) (36,345)
Capital stock issued pursuant to conversion of
convertible debentures - at $0.05 1,145,424 1,146 56,125 - 57,271
Net loss for the period - - - (34,650) (34,650)
___________ _________ __________ ___________ _________
Balance, December 31, 2005 151,065,824 $ 151,066 $ 6,180 $ (170,970) $ (13,724)
=========== ========= ========== =========== =========
* The common stock issued has been retroactively restated to reflect a
forward stock split of 1,500 new shares for one old share, effective on
January 5, 2001, and a forward split of 4 new shares for one old share,
effective February 20, 2006 (Note 4).
** The par value of common stock has been retroactively restated to reflect a
change from no par value to a par value of $0.001 per share.
F-6
BV PHARMACEUTICAL, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2005 and 2004
(Stated in US Dollars)
(UNAUDITED)
Note 1 NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated as All Printer Supplies.com in the
State of Nevada, U.S.A. on June 30, 2000. On April 17, 2003, the
Company changed it name to BV Pharmaceutical, Inc.
BV Pharmaceutical, Inc. is a DNA Profile Bank whose core business
is to provide interested parties services, information and
resources dealing with the collection, analysis, protection and
banking of one's personal and unique DNA profile. The company's
business has not yet developed significant revenue and
consequently is considered to be a development stage company (Note
2).
The Company intends to license the process for collection of DNA
samples to marketing agents on a geographical basis in order to
build revenue streams.
These financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going
concern, which assumes that the Company will be able to meet its
obligations and continue its operations for its next fiscal year.
Realization values may be substantially different from carrying
values as shown and these financial statements do not give effect
to adjustments that would be necessary to the carrying values and
classification of assets and liabilities should the Company be
unable to continue as a going concern. At December 31, 2005, the
Company had not yet achieved profitable operations, has
accumulated losses of $170,970 since its inception, has a working
capital deficiency of $13,724 and expects to incur further losses
in the development of its business, all of which casts substantial
doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent
upon its ability to generate future profitable operations and/or
to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when
they come due.
The Company plans to obtain additional financing by the sale of
its common stock through a private placement (Note 7). The
Company's services require further development and there can be no
assurance that it will be successful in selling its services.
During the subsequent year, the cost of developing services for
sale is likely to exceed their sale proceeds.
Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the
United States of America. Because a precise determination of many
assets and liabilities is dependent upon future events, the
preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful
judgement. Actual results may vary from these estimates.
F-7
BV Pharmaceutical, Inc.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2005 and 2004
(STATED IN US DOLLARS) - Page 2
Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (cont'd)
The financial statements have, in management's opinion, been
properly prepared within the framework of the significant
accounting policies summarized below:
DEVELOPMENT STAGE
The Company is currently a development stage company as defined
under Statement of Financial Accounting Standards ("SFAS") No. 7.
As required for development stage enterprises, the statements of
operations and cash flows include a total of all expenditures from
inception, June 30, 2000 to December 31, 2005.
INTANGIBLES
The Company follows SFAS No 142, "Goodwill and Other Intangible
Assets". SFAS No. 142 no longer permits the amortization of
goodwill and indefinite-lived intangible assets. Instead, these
assets must be reviewed annually (or more frequently under
prescribed conditions) for impairment in accordance with this
statement. If the carrying amount of the reporting unit's goodwill
or indefinite-lived intangible assets exceeds the implied fair
value, an impairment loss is recognized for an amount equal to
that excess. Intangible assets that do not have indefinite lives
are amortized over their useful lives.
FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments,
consisting of cash, accounts receivable and accounts payable and
accrued liabilities approximates their fair value due to their
short-term maturity. The carrying value of convertible debentures
also approximates their fair value. Unless otherwise noted, it is
management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments.
INCOME TAXES
The Company follows SFAS No. 109, "Accounting for Income Taxes"
which requires the use of the asset and liability method for
accounting for income taxes. Under the asset and liability method
of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
temporary differences between the financial statements carrying
amounts of existing assets and liabilities and loss carryforwards
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the year in which those temporary differences
are expected to be recovered or settled.
F-8
BV Pharmaceutical, Inc.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2005 and 2004
(STATED IN US DOLLARS) - Page 3
Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (cont'd)
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
The Company reports basic earnings (loss) per share in accordance
with the SFAS No. 128, "Earnings Per Share". Basic earnings (loss)
per share is computed using the weighted average number of shares
outstanding during the period. Diluted earnings (loss) per share
includes the potentially dilutive effect of outstanding common
stock options which are convertible into common shares. The
weighted average number of shares outstanding during the periods
has been retroactively restated to reflect a forward stock split
of 1,500 new shares for one old share, effective on January 5,
2001, and a forward split of 4 new shares for one old share,
effective February 20, 2006 (Note 4).
FOREIGN CURRENCY TRANSLATION
Monetary items denominated in a foreign currency are translated
into US dollars, the reporting currency, at exchange rates
prevailing at the balance sheet date and non-monetary items are
translated at exchange rates prevailing when the assets were
acquired or obligations incurred. Foreign currency denominated
revenue and expense items are translated at exchange rates
prevailing at the transaction date. Gains or losses arising from
the translations are included in operations.
REVENUE RECOGNITION POLICY
The Company receives revenues consisting of DNA test kit sales and
license fees. The Company recognizes revenues when persuasive
evidence of an arrangement exists, the product is delivered or the
services are rendered and collection is reasonably assured.
WEBSITE MAINTENANCE
Website maintenance costs are expensed as incurred.
NEW ACCOUNTING STANDARDS
Management does not believe that any recently issued, but not yet
effective accounting standards if currently adopted could have a
material effect on the accompanying financial statements.
F-9
BV Pharmaceutical, Inc.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2005 and 2004
(STATED IN US DOLLARS) - Page 4
Note 3 CONVERTIBLE DEBENTURES
2005 2004
____ _________
On January 15, 2004 the Company issued two
convertible debentures in the principal amount
of $25,000 each, bearing interest at 10% per
annum and secured by the general credit of the
Company. These debentures were convertible into
common shares of the Company on the basis of
$0.20 per common share for each $1 of principal
and interest accrued thereon, at the option of
the debenture holder, up to January 15, 2006.
During the year ended December 31, 2005, all
of the outstanding principal and interest were
converted into common shares of the Company at
the prescribed price.
$ - $ 54,792
Less: current portion - (50,000)
____ ________
$ - $ 4,792
===== ========
Note 4 CAPITAL STOCK - Notes 3 and 7
Effective on January 5, 2001, the Company forward split its issued
common stock on the basis of 1,500 new for one old.
On May 25, 2004, the Company amended its authorized capital stock
to 75,000,000 common shares with a par value of $0.001 per share.
The number of authorized shares and the par value per share as
referred to in these financial statements has been restated
wherever applicable to give retroactive effect to this amendment.
On February 10, 2006, the Company repurchased a total of
29,000,000 common shares from the President of the Company by the
issuance of a promissory note for $29,000. The promissory note
bears interest at 8% per annum and is due August 10, 2006.
Effective on February 20, 2006, the Company forward split its
issued common stock on the basis of four new for one old. The
number of shares referred to in these financial statements has
been restated wherever applicable to give retroactive effect on
the forward stock splits. There was no effect on the Company's
authorized share capital.
The retroactive restatement of the issued common shares is
required by the Securities and Exchange Commission's Staff
Accounting Bulletin, Topic 4c. In actuality, the forward stock
split, of four for one is effective after the Company's repurchase
of 29,000,000 common shares. Consequently, the number of shares
actually issued immediately prior to the split was 8,766,456
common shares. The actual number of common shares, both
pre-forward split and post-forward split, are less than the number
of common shares authorized of 75,000,000.
F-10
BV Pharmaceutical, Inc.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2005 and 2004
(STATED IN US DOLLARS) - Page 5
Note 5 FUTURE INCOME TAXES
Future income tax assets and liabilities are recognized for
temporary differences between the carrying amount of the balance
sheet items and their corresponding tax values as well as for the
benefit of losses available to be carried forward to future years
for tax purposes that are more likely-than-not to be realized.
Significant components of the Company's future tax assets and
liabilities, after applying enacted corporate income tax rates,
are as follows:
2005 2004
________ ________
Future income tax assets
Net tax losses carried forward $ 49,928 $ 36,415
Less: valuation allowance (49,928) (36,415)
________ ________
$ - $ -
======== ========
The Company recorded a valuation allowance against its future
income tax assets based on the extent to which it is more likely
than not that sufficient taxable income will be realized during
the carryforward periods to utilize all the future income tax
assets.
Note 6 INCOME TAXES
No provision for income taxes has been provided in these financial
statements due to the net loss. At December 31, 2005 the Company
has net operating loss carryforwards, which expire commencing in
2022, totalling approximately $170,970, the benefit of which has
not been recorded in the financial statements.
Note 7 SUBSEQUENT EVENTS - Note 4
On February 10, 2006, the Company approved a private placement
offering of up to 8,000,000 units at $0.25 per unit for proceeds
of $2,000,000. Each unit will consist of one post-forward split
common share and one stock purchase warrant exercisable into one
post-forward split common share at $0.30 per share for two years.
Note 8 NON-CASH TRANSACTION
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the statements of
cash flows. During the year ended December 31, 2005, the Company
issued 1,145,424 common shares at $0.05 per share pursuant to the
conversion of the convertible debenture of $57,271.
F-11
PART I.--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RADIAL ENERGY INC.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
================================================================================
RADIAL ENERGY INC.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
INTERIM BALANCE SHEETS
September 30, 2006 and December 31, 2005
(Stated in US Dollars)
(UNAUDITED)
September 30 December 31
2006 2005
____________ ___________
ASSETS
Current
Cash $ - $ 1,211
Prepaid expenses and deposit 7,857 -
Current assets of discontinued operations - Note 12 - 1,000
____________ ___________
7,857 2,211
Equipment - Note 4 1,980 -
Oil and gas properties, unproven - Note 5 2,418,426 -
____________ ___________
$ 2,428,263 $ 2,211
============ ===========
LIABILITIES
Current
Bank indebtedness $ 2,529 $ -
Accounts payable and accrued liabilities - Note 5 774,012 8,435
Due to related parties - Note 8 36,847 -
Notes payable - Note 6 385,000 -
Current liabilities of discontinued operations - Note 12 - 7,500
____________ ___________
1,198,388 15,935
____________ ___________
STOCKHOLDERS' EQUITY (DEFICIENCY)
Capital stock - Note 7
Authorized:
75,000,000 common stock, $0.001 par value
Issued:
44,585,824 common stock (December 31, 2005: 151,065,824) 44,586 151,066
Additional paid-in capital - shares 2,250,810 6,180
- warrants 904,950 -
Deficit accumulated during the development stage (194,472) (170,970)
Deficit accumulated during the exploration stage (1,775,999) -
____________ ___________
1,229,875 (13,724)
____________ ___________
$ 2,428,263 $ 2,211
============ ===========
SEE ACCOMPANYING NOTES
F-12
RADIAL ENERGY INC.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
INTERIM STATEMENTS OF OPERATIONS
for the three and nine-month periods ended September 30, 2006 and 2005
and for the period April 1, 2006 (Date of Exploration Stage) to September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
April 1, 2006
(Date of
Three months ended Nine months ended Exploration Stage)
September 30 September 30 to September 30,
2006 2005 2006 2005 2006
___________ ____________ ___________ ____________ ___________
Administrative expenses
Administration fees $ 5,831 $ - $ 14,331 $ - $ 14,331
Amortization 104 - 104 - 104
Consulting fees - Note 8 39,063 425 68,580 425 54,626
Executive compensation and benefits - Note 8 82,800 - 1,342,000 - 1,342,000
Filing fees 3,613 - 7,584 6,613 5,603
Financing fees - Note 9 11,250 - 11,250 - 11,250
Interest and bank charges 29,179 24 30,567 2,588 30,094
Investor relations 34,505 - 76,162 - 66,162
Marketing management services 17,460 - 46,610 - 46,610
Office and miscellaneous 1,733 473 4,384 3,898 1,671
Professional fees 63,281 3,399 88,693 11,009 81,825
Rent 5,097 - 7,419 - 7,419
Telephone 14,419 - 15,987 - 15,987
Transfer agent fees (recovery) 1,745 - 4,802 1,581 (618)
Travel and related costs 67,493 - 84,944 - 84,944
Website maintenance 1,897 - 13,991 273 13,991
___________ ____________ ___________ ____________ ___________
Loss before other items (379,470) (4,321) (1,817,408) (26,387) (1,775,999)
Other items:
Other income - - - - -
Gain on note payable forgiven - Note 7 - - 9,407 - -
___________ ____________ ___________ ____________ ___________
Net loss from continuing operations (379,470) (4,321) (1,808,001) (26,387) (1,775,999)
Income from discontinued operations - Note 12 - - 8,500 480 -
___________ ____________ ___________ ____________ ___________
Net loss for the period $ (379,470) $ (4,321) $(1,799,501) $ (25,907) $(1,775,999)
=========== ============ =========== ============ ===========
Basic loss per share from continuing operations $ (0.01) $ (0.00) $ (0.03) $ (0.00)
=========== ============ =========== ============
Basic income per share from discontinued operations $ - $ - $ 0.00 $ 0.00
=========== ============ =========== ============
Weighted average number of shares outstanding 42,742,346 150,493,112 54,649,121 150,113,400
=========== ============ =========== ============
SEE ACCOMPANYING NOTES
F-13
RADIAL ENERGY INC.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
for the nine-month period ended September 30, 2006 and 2005
and for the period April 1, 2006 (Date of Exploration Stage)
to September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
A pril 1, 2006
(Date of
Nine months ended Exploration Stage)
September 30, to September 30,
2006 2005 2006
___________ ____________ ___________
Cash Flows from (used in) Operating Activities
Net loss for the period $(1,799,501) $ (26,387) $(1,775,999)
Less Income from discontinued operations (8,500) (480) -
Deduct items not affecting cash:
Amortization 104 - 104
Gain on note payable forgiven (9,407) - -
Stock issued for executive compensation 1,200,000 - 1,200,000
Stock issued for financing fee 19,600 - 19,600
Changes in non-cash working capital balances related to operations:
Prepaid expenses (7,857) - 2,154
Accounts payable and accrued liabilities 765,984 (6,566) 756,531
___________ ____________ ___________
Cash used in operating activities - continuing 160,423 (32,953) 202,390
Cash provided by operating activities - discontinued 2,000 7,980 -
___________ ____________ ___________
Net cash provided by (used in) Operating Activities 162,423 (24,973) 202,390
___________ ____________ ___________
Cash Flows used in Investing Activities
Acquisition of equipment (2,084) - (2,084)
Oil and gas properties (2,418,426) - (2,418,426)
___________ ____________ ___________
Net cash used in Investing Activities (2,420,510) - (2,420,510)
___________ ____________ ___________
Cash Flows from Financing Activities
Bank indebtedness 2,529 - 2,529
Increase in due to related parties 36,847 - 36,847
Capital stock issued 1,852,500 - 1,852,500
Share subscribed - - (250,000)
Increase in note payable 365,000 - 385,000
Convertible debentures - 2,479 -
___________ ____________ ___________
Net cash provided by Financing Activities 2,256,876 2,479 2,026,876
___________ ____________ ___________
Decrease in cash during the period (1,211) (22,494) (191,244)
Cash, beginning of the period 1,211 24,964 191,244
___________ ____________ ___________
Cash, end of the period $ - $ 2,470 $ -
=========== ============ ===========
Non-cash Transactions - Note 11
SEE ACCOMPANYING NOTES
F-14
RADIAL ENERGY INC.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period June 30, 2000 (Date of Inception) to September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Deficit Deficit
Accumulated Accumulated
Additional Paid-in During the During the
Common Stock Capital Development Exploration
*Shares **ParValue Shares Warrants Stage Stage Total
___________ __________ __________ ________ ___________ ___________ _________
Capital stock subscribed
pursuant to an offering
memorandum for cash
- at $0.0000002 122,172,000 $ 122,172 $(121,968) $ - $ - $ - $ 204
___________ __________ _________ ________ ___________ ___________ _________
Balance, December 31, 2000 122,172,000 122,172 (121,968) - - - 204
Capital stock issued pursuant
to a private placement
- at $0.0025 27,108,400 27,108 40,663 - - - 67,771
- at $0.05 160,000 160 7,840 - - - 8,000
Net loss for the year - - - - (69,885) - (69,885)
___________ __________ _________ ________ ___________ ___________ _________
Balance, December 31, 2001 149,440,400 149,440 (73,465) - (69,885) - 6,090
Capital stock issued pursuant
to a private placement
- at $0.05 480,000 480 23,520 - - - 24,000
Net loss for the year - - - - (30,090) - (30,090)
___________ __________ _________ ________ ___________ ___________ _________
Balance, December 31, 2002 149,920,400 149,920 (49,945) - (99,975) - -
Net income for the year - - - - 108 - 108
___________ __________ _________ ________ ___________ ___________ _________
Balance, December 31, 2003 149,920,400 149,920 (49,945) - (99,867) - 108
Net loss for the year - - - (36,453) - (36,453)
___________ __________ _________ ________ ___________ ___________ _________
Balance, December 31, 2004 149,920,400 149,920 (49,945) - (136,320) - (36,345)
.../cont'd
SEE ACCOMPANYING NOTES
F-15
RADIAL ENERGY INC.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period June 30, 2000 (Date of Inception) to September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Deficit Deficit
Accumulated Accumulated
Additional Paid-in During the During the
Common Stock Capital Development Exploration
*Shares **ParValue Shares Warrants Stage Stage Total
___________ __________ __________ ________ ___________ ___________ _________
Capital stock issued pursuant
to conversion of convertible
debentures - at $0.05 1,145,424 1,146 56,125 - - - 57,271
Net loss for the year - - - - (34,650) - (34,650)
___________ __________ _________ ________ ___________ ___________ _________
Balance, December 31, 2005 151,065,824 151,066 6,180 - (170,970) - (13,724)
Capital stock retired to the
treasury (116,000,000) (116,000) 87,000 - - - (29,000)
Capital stock issued for
executive compensation
- at $0.80 1,500,000 1,500 1,198,500 - - - 1,200,000
Capital stock issued for loan
fee - at $0.98 20,000 20 19,580 - - - 19,600
Capital stock issued pursuant
to a private placement
- at $0.25 8,000,000 8,000 1,087,050 904,950 - - 2,000,000
Finders' fees on private
placement - - (147,500) - - - (147,500)
Net loss for the period - - - - (23,502) (1,775,999) (1,799,501)
___________ __________ _________ ________ ___________ ___________ _________
Balance, September 30, 2006 44,585,824 $ 44,586 $2,250,810 $904,950 $ (194,472) $(1,775,999) $1,229,875
=========== ========= ========= ======== =========== =========== ==========
* The common stock issued has been retroactively restated to reflect a forward stock split of 1,500 new shares
for one old share, effective January 5, 2001 and a forward split of four new shares for one old share,
effective February 20, 2006 (Note 7).
** The par value of common stock has been retroactively restated to reflect a change from no par value to a par
value of $0.001 per share.
SEE ACCOMPANYING NOTES
F-16
RADIAL ENERGY INC.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 1 INTERIM REPORTING
The accompanying unaudited interim financial statements have been
prepared by Radial Energy Inc. (the "Company") pursuant to the
rules and regulations of the United States Securities and Exchange
Commission. Certain information and disclosures normally included
in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments and
disclosures necessary for a fair presentation of these financial
statements have been included. Such adjustments consist of normal
recurring adjustments. These interim financial statements should
be read in conjunction with the audited financial statements of
the Company for the fiscal year ended December 31, 2005.
The results of operations for the nine months ended September 30,
2006 are not indicative of the results that may be expected for
the full year.
Note 2 CONTINUANCE OF OPERATIONS
These interim financial statements have been prepared in
accordance with generally accepted accounting principles
applicable to a going concern, which assumes that the Company will
be able to meet its obligations and continue its operations for
its next twelve months. Realization values may be substantially
different from carrying values as shown and these financial
statements do not give effect to adjustments that would be
necessary to the carrying values and classification of assets and
liabilities should the Company be unable to continue as a going
concern. At September 30, 2006, the Company had not yet achieved
profitable operations, has accumulated losses of $1,970,471 since
its inception, has a working capital deficiency of $1,190,531 and
expects to incur further losses in the development of its
business, all of which casts substantial doubt about the Company's
ability to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to
generate future profitable operations and/or to obtain the
necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come
due.
The Company has arranged a financing of up to $5,000,000 pursuant
to a securities purchase agreement to issue and sell to the
purchaser secured convertible debentures which shall be
convertible into shares of the Company's common stock and will
issue to the purchaser warrants to purchase the Company's common
stocks (Note 10).
F-17
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(An Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 3 ADDITIONAL ACCOUNTING POLICIES
EXPLORATION STAGE COMPANY
The Company complies with Financial Accounting Standard Board
Statement No. 7 the Securities and Exchange Commission Act Guide 7
for its characterization of the Company as an Exploration Stage
Company. The Company is devoting substantially all of its present
efforts to establish a new business and none of its planned
principal operations have commenced. For the purpose of providing
cumulative amounts for the statements of operations and cash
flows, these amounts consider only those losses for the period
from the Company's new exploration stage activity effective April
1, 2006.
OIL AND GAS PROPERTIES
The Company follows the full cost method of accounting for oil and
gas operations whereby all costs of exploring for and developing
oil and gas reserves are initially capitalized on a
country-by-country (cost centre) basis. Such costs include land
acquisition costs, geological and geophysical expenses, carrying
charges on non-producing properties, costs of drilling and
overhead charges directly related to acquisition and exploration
activities.
Costs capitalized, together with the costs of production
equipment, are depleted and amortized on the unit-of-production
method based on the estimated gross proved reserves. Petroleum
products and reserves are converted to a common unit of measure,
using 6 MCF of natural gas to one barrel of oil.
Costs of acquiring and evaluating unproved properties are
initially excluded from depletion calculations. These unevaluated
properties are assessed periodically to ascertain whether
impairment has occurred. When proved reserves are assigned or the
property is considered to be impaired, the cost of the property or
the amount of the impairment is added to costs subject to
depletion calculations.
If capitalized costs, less related accumulated amortization and
deferred income taxes, exceed the "full cost ceiling" the excess
is expensed in the period such excess occurs. The "full cost
ceiling" is determined based on the present value of estimated
future net revenues attributed to proved reserves, using current
prices less estimated future expenditures plus the lower of cost
and fair value of unproven properties within the cost centre.
Proceeds from a sale of petroleum and natural gas properties are
applied against capitalized costs, with no gain or loss
recognized, unless such a sale would alter the relationship
between capitalized costs and proved reserves of oil and gas
attributable to a cost centre. Royalties paid net of any tax
credits received are netted with oil and gas sales.
F-18
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 3 ADDITIONAL ACCOUNTING POLICIES - (cont'd)
EQUIPMENT AND DEPRECIATION
Equipment is recorded at cost and depreciated over their estimated
useful lives using the declining balance method. Additions are
depreciated at half the annual rate in the year of acquisition.
Note 4 EQUIPMENT
December 31,
September 30, 2006 2005
____________________________________________________ _________________
ACCUMULATED
COST DEPRECIATION NET NET
Computer equipment $ 2,084 $ 104 $ 1,980 $ -
============= ============= ============= ==============
Note 5 OIL AND GAS PROPERTIES
September 30, December 31,
2006 2005
____ ____
Anticline Project
Equipment and advance on exploration $ 1,650,000 $ -
Geological consulting 68,426 -
_______________ _______________
1,718,826 -
Cherokee County Project
Advance 700,000 -
_______________ _______________
$ 2,418,426 $ -
=============== ===============
i) Anticline Project
On May 11, 2006, the Company entered into a Joint Operating
Agreement ("JOA") with Peruvian and American companies whereby
the Company acquired a 20% working interest and 18% revenue
interest in an oil project located in Peru by funding the
acquisition of certain equipment, for the shipment of this
equipment to the project site in Peru and for the drilling,
testing and evaluation of the first exploratory well on the
property in the total amount of $1,650,000.
F-19
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 5 OIL AND GAS PROPERTIES - (cont'd)
i) Anticline Project
After the drilling of the first well is complete, the Company
will have the option whether to proceed with the project by
funding the drilling, testing and evaluation of another two
wells on the property for an additional $1,650,000. This
additional investment will also cover the costs to install
production facilities, including pipeline and loading dock,
tank batteries and pumping units as required to deliver the
produced oil to market. Thereafter, the Company will have the
option to pay for its 20% working interest share of the
development and operation of the project.
In the event the Company and the transacting parties decide
that the project is not feasible, the equipment acquired will
be sold and the Company will be entitled to 67% of the
proceeds.
At September 30, 2006, the Company had advanced $1,650,000
towards the acquisition of the equipment.
ii) Cherokee County Project
By an assignment agreement dated June 27, 2006 and amended
September 29, 2006, the Company has agreed to acquire a
working interest from a Canadian company in three separate
exploratory oil and gas prospects located in Cherokee County,
Texas, under three leasehold assignment agreements with a
company in Texas. In consideration for the assignment, the
Company has agreed to pay $700,000 on or before November 17,
2006, with the vendor retaining a 4% overriding royalty. The
payment covers the Company's share of the estimated capital
expenditures to drill and complete the first test wells on
each of the three prospects. The leasehold agreement for all
three prospects includes a 30% working interest before payout
of initial investment of the Canadian company and a 22.5%
working interest after payout, with payout determined on a per
project basis.
In the event that the Company fails to make the payment, the
Canadian company has the option to have the rights of the
agreement revert back or to receive from the Company a penalty
payment in the amount of 120% of the $700,000 consideration
and at its option, the amount shall be convertible into the
securities of the Company at a price equal to the lowest
offering price of the Company's securities to the general
public during the year ended December 31, 2006.
F-20
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 6 NOTES PAYABLE - Note 7
On July 12, 2006, the Company received $250,000 pursuant to a
promissory note. The note is unsecured, bears interest at 12% per
annum and is due July 12, 2007.
On July 31, 2006, the Company received $100,000 pursuant to a
promissory note. The note is unsecured, bears interest at 12% per
annum and is due July 31, 2007. The Company paid a loan fee by the
issuance of 20,000 shares of common stock valued at $19,600.
On September 19, 2006, the Company received $35,000, pursuant to a
promissory note. The note is unsecured, non-interest bearing and
is due September 19, 2006. The note was paid in full subsequent to
September 30, 2006.
Note 7 CAPITAL STOCK - Notes 6 and 9
Effective on January 5, 2001, the Company forward split its issued
common stock on the basis of 1,500 new for one old.
On May 25, 2004, the Company amended its authorized capital stock
to 75,000,000 common shares with a par value of $0.001 per share.
The number of authorized shares and the par value per share as
referred to in these financial statements has been restated
wherever applicable to give retroactive effect to this amendment.
On February 10, 2006, the Company repurchased a total of
29,000,000 common shares at $0.001 per share from the previous
President of the Company by the issuance of a promissory note for
$29,000 bearing interest at 8% per annum and due August 10, 2006.
The Company repaid $20,000 of the promissory note on March 27,
2006, which was accepted as payment in full. Consequently the
balance of the note and related interest was written off during
the three months ended March 31, 2006.
Effective on February 20, 2006, the Company forward split its
issued common stock on the basis of four new for one old. The
number of shares referred to in these financial statements has
been restated wherever applicable to give retroactive effect on
the forward stock splits. There was no effect on the Company's
authorized share capital.
The retroactive restatement of the issued common shares is
required by the Securities and Exchange Commission's Staff
Accounting Bulletin, Topic 4c. In actuality, the forward stock
split, of four for one is effective after the Company's repurchase
of 29,000,000 common shares. Consequently, the number of shares
actually issued immediately prior to the split was 8,766,456
common shares. The actual number of common shares, both
pre-forward split and post-forward split, are less than the number
of common shares authorized of 75,000,000.
F-21
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 7 CAPITAL STOCK - Notes 6 and 9 - (cont'd)
n March 29, 2006, the officers of the Company approved a plan of
merger between the Company and Radial Energy Inc. a wholly-owned
inactive subsidiary of the Company incorporated in the State of
Colorado on April 10, 2006 by the Company. Under the plan of
merger, the shares of Radial Energy Inc. were cancelled and the
shareholders of the Company received one share of the newly-merged
company for every share of BV Pharmaceutical, Inc. held. The
purpose of the merger was to facilitate a name change to Radial
Energy Inc.
On July 7, 2006, the Company issued 1,500,000 common shares at
$0.80 per share to an officer of the Company pursuant to an
employment agreement (Note 9).
On July 21, 2006, the Company issued 8,000,000 units at $0.25 per
unit for proceeds of $2,000,000 through the private placement
offering approved by the Company on February 10, 2006. Each unit
consists of one common share and one stock purchase warrant
exercisable until August 4, 2008, into one common share at $0.30
per share. The Company recorded finders' fees totalling $147,500,
$117,500 was paid at September 30, 2006 and the remaining $30,000
was paid subsequent to September 30, 2006.
On July 31, 2006, the Company issued 20,000 common shares for a
loan fee valued at $19,600 pursuant to a promissory note for
$100,000.
STOCK PURCHASE WARRANTS
As of September 30, 2006, the Company had 8,000,000 warrants
outstanding entitling the holder thereof the right to purchase one
common share for each warrant held.
The fair value of these warrants of $904,950 was determined using
the Black-Scholes stock price valuation model with the following
assumptions:
Expected share price volatility 96%
Risk free interest rate 4.91%
Expected dividend yield 0.0%
Expected term in years 2
F-22
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 8 RELATED PARTY TRANSACTIONS - Notes 7 and 9
The Company incurred the following amounts charged by a former
director of the Company and directors and officers of the Company
pursuant to employment agreements (Note 9):
April 1, 2006
(Date of
Three months ended Nine months ended Exploration
Stage) to
September 30, September 30, September 30,
2006 2005 2006 2005 2006
____ ____ ____ ____ ____
Consulting fees $ - $ - $ 9,000 $ - $ -
Executive compensation and
benefits 82,800 - 1,342,000 - 1,342,000
____________ __________ ____________ ___________ ______________
$ 82,800 $ - $ 1,351,000 $ - $ 1,342,000
============ ========== ============ =========== ==============
As at September 30, 2006, the due to related parties of $36,847
(December 31, 2005: $Nil) consists of expenses owing to the
directors and officers of the Company. These amounts are
unsecured, non-interest bearing and have no specific terms of
repayment.
Note 9 COMMITMENTS - Notes 7 and 10
i) By an employment agreement dated March 10, 2006 with the
President of the Company, and effective April 1, 2006, the
Company will pay $180,000 per year plus annual bonuses as
determined by the Board of Directors of the Company. In
addition, the President will receive a $400 per month auto
allowance, $800 per month insurance reimbursement and a
minimum $1,000 per month for rental and administrative
expenses to maintain an office. The Company may also issue
stock options to the President as deemed appropriate by the
Board of Directors. The term of the agreement is 3 years.
ii) By an employment agreement dated June 1, 2006, with the Chief
Operating Officer of the Company, and effective June 1, 2006,
the Company will pay $132,000 per year plus annual bonuses as
determined by the Board of Directors of the Company. In
addition, the Chief Operating Officer will receive a $400 per
month auto allowance, $800 per month reimbursement of the
costs of the medical insurance coverage and a minimum $1,000
per month for rental and administrative expenses to maintain
an office. The Company may also issue stock options to the
Chief Operating Officer as deemed appropriate by the Board of
Directors. The term of the agreement is 3 years. In addition,
during the nine months ended September 30, 2006, the Company
issued 1,500,000 common shares restricted under the Securities
and Exchange Commission Rule 144 for additional consideration
for this agreement valued at $1,200,000.
F-23
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 9 COMMITMENTS - Notes 7 and 10 - (cont'd)
iii) By a business consulting agreement dated April 1, 2006, the
Company will pay $10,000 per month for investor relations
services for a term of two years.
iv) On August 23, 2006, the Company entered into a Letter of
Intent with a Columbian company, to enter into a joint
operating agreement to acquire a twenty percent (20%) working
interest in the right to explore and develop oil reserves and
production located in Middle Magdalena Valley of Columbia. The
Company's working interest will be subject to a joint
operating agreement which is to be negotiated.
The Company will be required to contribute $2,200,000 in cash
upon execution of the joint operating agreement, $350,000 will
be due upon signing the joint operating agreement and another
$350,000 will be due sixty days following the signing of the
joint operating agreement. The remaining $1,500,000 will be
due fifteen days following any capital call made by the
Columbian company at any time following the execution of the
joint operating agreement.
The Company will receive a 33.33% participation in
distributions until payout of $1,500,000 of its investment,
then after payout, the interest will remain at 20%.
The Company has until November 22, 2006 to enter into the
joint operating agreement. If the company fails to enter into
the agreement by the deadline, then the Columbian company will
have no obligation to enter into the joint operating
agreement. Further, if the Company fails to properly execute
the joint operating agreement, it shall be liable for a
termination fee of up to $200,000 as follows:
(a) $50,000, if the Company terminates at any time on or
before the date the Colombian government issues the
appropriate authority to the Columbian Company to begin
operations at the site;
(b) total of $100,000, if the Company terminates following the
date the Colombian government issues such authority; and
(c) total of $200,000, if the Company terminates more than 30
days following the date the Columbian government issues
such authority.
v) The Company has an office lease for a term of one year from
September 1, 2006 to August 31, 2007 at a monthly lease of
$1,300. It will automatically renew for the same term. The
termination clause in the agreement requires a notice of three
months.
F-24
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 10 SUBSEQUENT EVENTS - Note 7
i) On October 2, 2006, the Company entered into a securities
purchase agreement to issue up to $5,000,000 of secured
convertible debentures which shall be convertible into common
stock and stock purchase warrants to purchase common stock.
Pursuant to the securities purchase agreement, the Company
entered into an Investor Registration Rights Agreement,
Security Agreement, and a Pledge and Escrow Agreement with the
Purchaser. The Company will pay the purchaser a commitment fee
of 10% of $5,000,000, which shall be paid proportionately upon
each disbursement. In addition, the Company will pay the
purchaser a non-refundable fee of $22,500 for structuring and
due diligence in connection with this transaction ($11,250
paid during the nine months ended September 30, 2006).
The Company received $3,500,000 and the remaining $1,500,000
shall be funded within three business days after a
registration statement for this debenture is declared
effective by the Securities and Exchange Commission.
Pursuant to the securities purchase agreement, the Company
issued to the purchaser 3,333,333 stock purchase warrants at
an exercise price of $0.75 per share, 2,500,000 stock purchase
warrants at an exercise price of $1.00 per share, 2,333,333
stock purchase warrants at an exercise price of $1.50 per
share, and is obligated to issue to the purchaser an
additional 1,000,000 stock purchase warrants at an exercise
price of $1.50 per share when the final funding is received.
The warrants will be exercisable for a term of five years. The
Company has the option to force the purchaser to exercise the
warrants within five days following the forced exercise notice
assuming that there is sufficient number of shares of common
stock to cover the underlying amount of warrants to be
exercised and the daily Volume Weighted Average Price of the
common stock for each of the five consecutive trading days
prior to the forced exercised notice date is above the
exercise price. The forced exercise notice shall be limited to
1/5 of the trading volume during the five day period. Any
allowable forced exercise notice shall be reduced by any
warrant amounts exercised by the purchaser during the five day
period.
The debentures bear interest at 7.0% per annum, are due on
October 2, 2009, secured by the assets of the Company and a
pledge of common stock which shall include common stock held
by the Company's officers and directors and the remaining
shares shall be delivered in the form of a stock certificate
in the name of the Company, to be held in escrow and are
convertible into the Company's common stock, at the option of
the purchaser at any time prior to redemption by the Company.
The debentures will be convertible at a conversion price equal
to the lesser of $1.0536 or 90% of the lowest volume weighted
average daily closing price of the Company's common stock,
during the 15 trading days immediately prior to the conversion
date. The notes contain a provision whereby no holder is able
to convert any part of the note into shares of the Company's
common stock, if such conversion would result in beneficial
ownership of the holder and its affiliates of more than 4.99%
of the Company's then outstanding shares of common stock. The
Company has the right at its option to redeem a portion or all
amounts outstanding under the debentures by paying the holder
the principal amount being redeemed plus a redemption premium
of 20 to 30%.
F-25
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 10 SUBSEQUENT EVENTS - Note 7 - (cont'd)
i) - (cont'd)
The warrants are detachable from the convertible debentures
and will been accounted for separately in accordance with APB
14 "Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants". The conversion features of the convertible
debentures will be classified as equity instruments in
accordance with EITF 00-19. The proceeds of the issuance will
be allocated on a relative fair value basis between the
convertible debentures and the detachable warrant in
accordance with APB 14. Subsequent to the allocation of the
proceeds of the convertible debenture financing and in
accordance with EITF 00-27, the Company will record the
beneficial conversion feature, if any, as additional paid-in
capital. The Company will amortize the discount using the
effective interest method from commitment date to the
redemption date.
ii) On October 6, 2006, the Company entered into a Letter of
Intent with two companies in Denver, Colorado to participate
in an Acreage Earning Agreement with a third party on acres of
federal Wasatch/Mesa Verde formation leasehold interests which
are located in Uintah County, Utah.
Pursuant to the agreement, the Company shall commit to the
drilling of a minimum of three wells in 2007 and three wells
in 2008 to test the property. The Company will carry the
parties for 37.5% interest in the first three wells and will
carry the parties for 12.5% working interest in the second
three wells. Upon completion of the respective drilling
obligations, the parties shall bear their 37.5% interest of
all further wells, with the Company bearing the remaining
62.5% working interest. In the event the parties enter into an
area of mutual interest with respect to any additional related
acreage, such acreage shall be owned 62.5% by the Company and
12.5% by the two Colorado companies with the remaining 25%
being offered to the third party. Should the Company fail to
fund its share of the required wells during the first 2
year-period, it shall earn interest only in the drillsite
spacing units and all undrilled acreage will revert back to
the two companies.
The Company was required to enter into a Definitive Agreement
setting out the final terms of the agreement by no later than
October 25, 2006 and was required to pay to the two Colorado
companies' finders' fees in the amount of $100,000. This
amount was paid on October 19, 2006. This agreement has been
extended to November 14, 2006.
F-26
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 11 NON-CASH TRANSACTIONS
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the statements of
cash flows.
During the nine month period ended September 30, 2006:
- the Company repurchased 116,000,000 common shares by the
issuance of a promissory note for $29,000.
- the Company issued 1,500,000 common shares at $0.80 totalling
$1,200,000 to a director of the Company pursuant to an
employment agreement.
- the Company issued 20,000 common shares for a financing fee
valued at $19,600 pursuant to a promissory note.
During the period ended September 30, 2005
- the Company issued 286,356 common shares at $0.20 per share
pursuant to the conversion of the $57,271 convertible
debentures.
These transactions have been excluded from the statements of cash
flows.
Note 12 DISCONTINUED OPERATIONS
During the nine months ended September 30, 2006, concurrent with
the name change of the Company (Note 7), the Company announced its
intention to shift its direction of business towards the
acquisition, exploration and development of oil and gas projects.
Previously, the Company's business was the collection, analysis
and banking of personal DNA data. Assets, liabilities and results
of operations from the Company's previous business have been
disclosed as discontinued operations for the nine months ended
September 30, 2006 and prior periods have been restated to conform
with the current presentation.
The balance sheets include the following amounts related to
discontinued operations:
September 30, December 31,
2006 2005
Current assets of discontinued operations: ____ ____
Accounts receivable $ - $ 1,000
=============== ===============
Current liabilities of discontinued operations:
Unearned revenue $ - $ 7,500
=============== ===============
F-27
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 12 DISCONTINUED OPERATIONS - (cont'd)
Net income from discontinued operations are as follows:
April 1, 2006
(Date of
Exploration
Three months ended Nine months ended Stage) to
September 30, September 30, September 30,
2006 2005 2006 2005 2006
____ ____ ____ ____ ____
Revenues
License fees $ - $ - $ - $ - $ -
Other income - - 8,500 480 -
____________ ____________ ___________ ____________ ______________
- - 8,500 480 -
____________ ____________ ___________ ____________ ______________
Administrative expenses
Bad debt - - - - -
Intellectual property
acquisition costs - - - - -
Marketing research
and development - - - - -
____________ ____________ ___________ ____________ ______________
- - - - -
____________ ____________ ___________ ____________ ______________
Income from
discontinued operations $ - $ - $ 8,500 $ 480 $ -
============ ============ =========== ============ ==============
Cash flows from discontinued operations are as follows:
April 1, 2006
(Date of
Exploration
Nine months ended Stage) to
September 30, September 30,
2006 2006 2006
Cash Flows used in Operating Activities ____ ____ ____
Net income from discontinued operations $ 8,500 $ 480 $ -
Changes in non-cash working capital balances related
to operations
Accounts receivable 1,000 - -
Unearned revenue (7,500) 7,500 -
______________ ___________ ______________
Increase in cash from discontinued operations $ 2,000 $ 7,980 $ -
============== =========== ==============
F-28
Radial Energy Inc.
(formerly BV Pharmaceutical, Inc.)
(A Exploration Stage Company)
Notes to the Financial Statements
September 30, 2006
(Stated in US Dollars)
(UNAUDITED)
Note 13 COMPARATIVE FIGURES
Certain of the comparative figures for the nine months ended
September 30, 2005, have been reclassified to conform with the
current periods presentation.
F-29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our bylaws provide indemnification by the company of any individual
made a party to proceeding because he is or was an officer, director, employee
or agent of the company against liability incurred in the proceeding, to the
fullest extent permissible under the laws of Nevada. The bylaws provide that the
company advance the expenses of officers and directors incurred in defending any
such proceeding, provided that the company received an undertaking from such
person to repay the expenses advanced if it is ultimately determined that he is
not entitled to be indemnified.
The Nevada Revised Statutes ("NRS"), Chapter 78 provides:
NRS 78.7502 provides for the discretionary and mandatory
indemnification of officers, directors, employees and agents.
NRS 78.7502 (1) provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
NRS 78.7502 (2) provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
NRS 78.7502 (3) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections 78.7502 (1) or
78.7502 (2), or in defense of any claim, issue or matter therein, the
corporation shall indemnify him against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense.
NRS 78.751 provides that authorization is required for discretionary
indemnification of directors, officers, employees or agents, advancement of
expenses to those parties and a limitation on indemnification and advancement of
expenses.
NRS 78.751 (1) provides that any discretionary indemnification under
NRS 78.7502, unless ordered by a court or advancement pursuant to subsection 2,
may be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the action, suit or
proceeding;
II-1
(c) If a majority vote of a quorum consisting of directors who were
not parties to the action, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
NRS 78.751 (2) provides that the articles of incorporation, the bylaws
or an agreement made by the corporation may provide that the expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred or in advance of
the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of this subsection
do not affect any rights to advancement of expenses to which corporate personnel
other than directors or officers may be entitled under any contract or otherwise
by law.
NRS 78.751 (3) provides that the indemnification and advancement of
expenses authorized in or ordered by a court pursuant to NRS 78.751:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either
an action in his official capacity or an action in another
capacity while holding his office, except that indemnification,
unless ordered by a court pursuant to NRS 78.7502 or for the
advancement of expenses made pursuant to subsection 2, may not be
made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law
and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC that such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 25 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses relating to the registration of shares of common stock
will be borne by us. These expenses, except the SEC registration fee, are
estimated to be as follows:*
SEC Registration fee...................................... $ 1,341
Accounting fees and expenses.............................. $ 1,000
Legal fees and expenses................................... $ 40,000
Printing and engraving expenses........................... $ 2,000
Registrar and transfer agent's fees....................... $ 500
Miscellaneous fees and expenses........................... $ 1,000
---------
Total.................................................. $ 45,841
- ---------------------
* The selling stockholders will pay any sales commissions or underwriting
discounts incurred in connection with the sale of shares registered
hereunder.
ITEM 26 RECENT SALES OF UNREGISTERED SECURITIES
From March 14, 2006 through August 2006, we sold to investors pursuant
to subscription agreements an aggregate of 8,000,000 units, consisting of shares
of our common stock and warrants to purchase our common stock in a private
placement. Each unit consisted of one share of common stock and a warrant to
purchase one share of common stock. The purchase price was $0.25 per unit and we
received an aggregate of $2,000,000 in gross proceeds. The warrants have an
exercise period of two years and an exercise price of $0.30 per share. The
private placement had a minimum offering amount of $100,000 and a maximum
offering amount of $2,000,000. In connection with the private placement, we paid
an aggregate of $147,500 as finders' fee. The securities sold in the private
placement were exempt from registration under the Securities Act of 1933, as
II-2
amended, pursuant to Regulation S promulgated thereunder and pursuant to the
exemption from provided by Section 4(2) of the Securities Act for issuances not
involving a public offering.
On October 2, 2006, we entered into a Securities Purchase Agreement
with Cornell Capital Partners, LP for the private placement of secured
convertible debentures in the aggregate principal amount of $5,000,000. We
closed on the first $2,000,000 on October 4, 2006; an additional $1,500,000 was
funded on the date this Registration Statement was filed with the SEC; and the
final $1,500,000 will be funded within three business days after this
Registration Statement is declared effective by the SEC. The debentures accrue
interest at a rate of 7.0% per annum, payable on the maturity date, and payable
in cash or in shares of our common stock, at our option. The term of the
debentures is three years, and the debentures will be convertible at a
conversion price equal to the lesser of $1.0536 or 90% of the lowest daily
volume weighted average price during the 15 trading days immediately preceding
the conversion date, subject to a weighted average anti-dilution adjustment and
other adjustments. We have the right at our option to redeem a portion or all
amounts outstanding under the debentures by paying the holder the principal
amount being redeemed plus a redemption premium, which is either 20% or 30% of
the principal amount being redeemed depending on what the fixed conversion price
is at the time of redemption as compared to the closing bid price of our common
Stock. We also issued to the purchaser 3,333,333 common stock purchase warrants
at an exercise price of $0.75 per share, 2,500,000 common stock purchase
warrants at an exercise price of $1.00 per share, 2,333,333 common stock
purchase warrants at an exercise price of $1.50 per share, and we are obligated
to issue to the purchaser an additional 1,000,000 common stock purchase warrants
at an exercise price of $1.50 per share on the third closing date. The warrants
will be exercisable for a term of five years. The issuance of the debentures and
warrants are exempt from registration pursuant to Regulation D promulgated under
the Securities Act of 1933, as amended. In connection with the private
placement, we agreed to pay a commitment fee equal to 10% of the purchase price
from each closing and a structuring fee of $22,500 to the general partner of the
purchaser.
ITEM 27 EXHIBITS
Exhibit
Number Description of Document
- ------- ---------------------------------------------------------------------
3(i).1 Amended and Restated Articles of Incorporation filed with the
Nevada Secretary of State effective as of April 17, 2003.
(Incorporated by reference to Exhibit 3(i).1 of Radial Energy
Inc.'s Registration Statement on Form SB-2 filed on April 19,
2004.)
3(i).2 Certificate of Amendment to Articles of Incorporation filed with
the Nevada Secretary of State Effective as of September 23, 2003.
(Incorporated by reference to Exhibit 3(i).2 of Radial Energy
Inc.'s Registration Statement on Form SB-2 filed on April 19,
2004.)
3(i).3 Certificate of Amendment to Articles of Incorporation filed with
the Nevada Secretary of State Effective as of June 21, 2004.
(Incorporated by reference to Exhibit 3 of Radial Energy's
Registration Statement on Form SB-2/A filed on July 15, 2004.)
3(i).4 Articles of Merger filed with the Nevada Secretary of State
effective as of April 3, 2006. (Incorporated by reference to
Exhibit 2 of Radial Energy Inc.'s Current Report on Form 8-K
filed on April 21, 2006.)
3(i).5 Certificate of Correction filed with the Nevada Secretary of
State effective as of September 26, 2006. (Filed herewith.)
3(ii) Bylaws (Incorporated by reference to Exhibit 3(ii) of Radial
Energy Inc.'s Registration Statement on Form SB-2 filed on April
19, 2004.)
5.1 Opinion of Greenberg Traurig, LLP as to the legality of the
securities being offered. (Filed herewith.)
10.1 Form of Subscription Agreement. (Incorporated by reference to
Exhibit 10.1 of Radial Energy Inc.'s Quarterly Report on Form
10-QSB for the quarter ended June 30, 2006.)
10.2 Form of Common Stock Purchase Warrant. (Incorporated by reference
to Exhibit 10.2 of Radial Energy Inc.'s Quarterly Report on Form
10-QSB for the quarter ended June 30, 2006.)
10.3 Letter of Intent by and between Radial Energy Inc. and
Ziegler-Peru Inc. dated April 19, 2006. (Incorporated by
reference to Exhibit 10.3 of Radial Energy Inc.'s Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2006.)
10.4 Joint Operating Agreement by and between Radial Energy Inc.,
Ziegler-Peru Inc., and Compania Consultora de Petroleo, S.A.
effective as of May 11, 2006. (Incorporated by reference to
Exhibit 10.4 of Radial Energy Inc.'s Quarterly Report on Form
10-QSB for the quarter ended June 30, 2006.)
II-3
Exhibit
Number Description of Document
- ------- ---------------------------------------------------------------------
10.5 Employment Agreement by and between Radial Energy Inc. and G.
Leigh Lyons dated March 10, 2006. (Incorporated by reference to
Exhibit 10.5 of Radial Energy Inc.'s Quarterly Report on Form
10-QSB for the quarter ended June 30, 2006.)
10.6 Employment Agreement by and between Radial Energy Inc. and Omar
Michel Hayes dated June 1, 2006. (Incorporated by reference to
Exhibit 10.6 of Radial Energy Inc.'s Quarterly Report on Form
10-QSB for the quarter ended June 30, 2006.)
10.7 Assignment Agreement by and between Radial Energy Inc. and Pin
Petroleum Partners Ltd. dated June 27, 2006. (Incorporated by
reference to Exhibit 10.7 of Radial Energy Inc.'s Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2006.)
10.8 Letter of Intent by and between Radial Energy Inc. and Maxim Well
Services Ltd. dated August 23, 2006. (Incorporated by reference
to Exhibit 10.1 of Radial Energy Inc.'s Quarterly Report on Form
10-QSB for the quarter ended September 30, 2006.)
10.9 Amendment to Assignment Agreement by and between Radial Energy
Inc. and Pin Petroleum Partners Ltd. dated September 29, 2006.
(Incorporated by reference to Exhibit 10.2 of Radial Energy
Inc.'s Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2006.)
10.10 Securities Purchase Agreement dated October 2, 2006 by and
between Radial Energy Inc. and Cornell Capital Partners, L.P.
(Filed herewith.)
10.11 Form of Secured Convertible Debentures. (Filed herewith.)
10.12 Form of Common Stock Purchase Warrant. (Filed herewith.)
10.13 Security Agreement dated October 2, 2006 by and between Radial
Energy Inc. and Cornell Capital Partners, L.P. (Filed herewith.)
10.14 Pledge and Escrow Agreement dated October 2, 2006 by and between
Radial Energy Inc. and Cornell Capital Partners, L.P. (Filed
herewith.)
10.15 Investor Registration Rights Agreement dated October 2, 2006 by
and between Radial Energy Inc. and Cornell Capital Partners, L.P.
(Filed herewith.)
10.16 Letter Agreement with Maxim Well Services Ltd., dated November
14, 2006, amending Letter of Intent, dated August 23, 2006.
(Incorporated by reference to Exhibit 10.1 of Radial Energy
Inc.'s Current Report on Form 8-K filed on November 20, 2006.)
23.1 Consent of Amisano Hanson, Chartered Accountants (Filed
herewith.)
23.2 Consent of Greenberg Traurig, LLP (included in Exhibit 5.1)
23.3 Consent of Gustavson Associates LLC
ITEM 28 UNDERTAKINGS
A. The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
notwithstanding the foregoing, any increase or decrease in the of
securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such information
in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, to determine liability to any purchaser in the initial
distribution of the securities, in a primary offering of
securities of the undersigned small business issuer pursuant to
this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any
of the following communications, the
II-4
undersigned small business issuer will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
small business issuer relating to the offering required to be
filed pursuant to Rule 424 (ss.230.424 of this chapter);
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned small business issuer
or used or referred to by the undersigned small business issuer;
(iii) The portion of any other free writing prospectus relating
to the offering containing material information about the
undersigned small business issuer or its securities provided by
or on behalf of the undersigned small business issuer; and
(iv) Any other communication that is an offer in the offering
made by the undersigned small business issuer to the purchaser.
B. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
C. The undersigned small business issuer hereby undertakes that, for the purpose
of determining liability under the Securities Act to any purchaser:
(1) If the small business issuer is relying on Rule 430B (ss.230.430B
of this chapter):
(i) Each prospectus filed by the undersigned small business
issuer pursuant to Rule 424(b)(3) (ss.230.424(b)(3) of this
chapter) shall be deemed to be part of the registration statement
as of the date the filed prospectus was deemed part of and
included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) (ss.230.424(b)(2), (b)(5), or (b)(7)
of this chapter) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) (ss.230.415(a)(1)(i), (vii), or (x)
of this chapter) for the purpose of providing the information
required by section 10(a) of the Securities Act shall be deemed
to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and
any person that is at that date an underwriter, such date shall
be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such
effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on the 20th day of
February 2007.
RADIAL ENERGY INC.
By: /s/ G. LEIGH LYONS
-------------------------------
G. Leigh Lyons, President,
Chief Executive Officer,
Chief Financial Officer,
and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title(s) Date
/s/ G. LEIGH LYONS
- -------------------
G. Leigh Lyons President, Chief Executive Officer, February 20, 2007
Chief Financial Officer, Secretary
and Director
(Principal Executive Officer,
Principal Financial and Accounting
Officer)
/s/ OMAR HAYES
- ----------------
Omar Hayes Chief Operating Officer and Director February 20, 2007
II-6