ARETE INDUSTRIES INC

Short of working capital, Arete sold five small Kansas and Wyoming working interests for $300,000 to a truck-wash company half owned by its own chief executive, with the remaining directors negotiating the price. Its bank line was cut to $523,000 and extended to 2020 - and this turned out to be the last report Arete ever filed.

asset acquisition disposition

Hein quit after a single year, having warned of substantial doubt about Arete's ability to keep operating and of material weaknesses in its controls; Haynie & Company took over. Three audit firms in eighteen months, with a going-concern warning attached to the last one.

auditor change

The Wellstar purchase closed on 30 December, paid for with $1.7 million raised from a new 7% preferred issue. On the same day Arete settled with the Tucker, DNR and Tindall group for $303,329 in cash plus preferred shares, closing out what was left of the 2011 deal and ending five years of entanglement with director Charles Davis's companies.

asset acquisition disposition

Arete agreed to buy producing oil leases in Sumner County, Kansas and Kimball County, Nebraska from Wellstar for $1.1 million cash plus a million shares - its first acquisition since 2011 and, unusually, from a seller with no connection to its own directors.

material agreement

Arete got its first bank money: a $1.5 million CityWide Bank line secured on seven wells, a third party's $500,000 deposit and the personal guarantee of chief executive Nicholas Scheidt. It also turned the scattered director advances into formal notes and pushed back what it owed Burlingame.

material agreement

To escape the 15% preferred issued in 2011, Arete cut its conversion price from $3.35 to $0.75 and holders - the Burlingame funds plus directors Davis and Scheidt - swapped 497.5 preferred shares for 5.2 million ordinary shares and gave up their dividends. Heavy dilution bought an end to the dividend drain.

capital raising announcement

A second and larger loan from Scheidt's Apex Financial, $1 million at 7.5% on the same three-quarters-of-income security. Scheidt is now chief executive, so Arete's main lender and its boss are the same man.

debt financing

Arete borrowed $455,000 at 12% from Apex Financial, owned by shareholder and consultant Nicholas Scheidt, pledging three-quarters of all oil and gas income and of any future asset-sale proceeds. Expensive insider money, on terms that leave little cash for anything else.

debt financing

Arete made the final payment on 30 September and completed the DNR and Tindall purchase, funded by breaking escrow on a private placement that raised $5.2 million of 15% convertible preferred stock. A deal signed in 2009 was finally paid for, at the price of expensive preferred ranking ahead of ordinary shareholders.

asset acquisition disposition

Arete sold part of the package it had only just bought for about $5.0 million, booking a $2.66 million gain, and put $3.7 million of it straight back to the sellers. The acquisition was in effect being paid for by breaking it up.

asset acquisition disposition

The purchase first announced in 2009 finally closed at $10 million - but Arete put in only $500,000 of its own cash, with the sellers financing $9.5 million on a note due five weeks later and secured on the properties themselves. DNR is owned by Arete director Charles Davis.

material agreement

Arete signed a definitive agreement to buy 243 wells - 46 producing, 197 undeveloped - from the same DNR and Tindall group it first dealt with in 2005, far bigger than anything it had attempted before. The wells feed the Wyoming pipeline Arete already owned, but the deal would not actually close for another two years.

material agreement

Arete paid $330,000 for the TOP gathering system, 4.5 miles of pipeline in Wyoming's Powder River Basin carrying gas from 33 wells at about a third of its capacity - its first infrastructure asset. The $400,000 needed came from two of its own directors and one outsider, on terms that had not been agreed when the filing was made.

asset acquisition disposition

A late quarterly report got Arete thrown off the OTC Bulletin Board; it paid a $4,000 fee, appealed and won a hearing. Chronic late filing would follow the company for the rest of its life.

listing compliance notice

Arete distributed its Avatar Technology Group subsidiary to shareholders as a share dividend, one Avatar share for every 975 Arete shares held - shedding the last of its non-energy businesses as it narrowed to oil and gas.

dividend declaration

Colorado Oil and Gas, Arete's majority-owned subsidiary, agreed to buy 13 producing wells across five Colorado fields from Tucker Family Investments, DNR Oil & Gas and Tindall Operating - the smaller, fundable deal promised when the Texas and Oklahoma prospects were dropped in March. Those same three sellers would be Arete's principal counterparty for the next decade.

material agreement

Arete walked away from the three Texas and Oklahoma prospects it had tied up in December, after its own financing consultants judged them too risky to back, and said it would chase smaller deals it could actually pay for.

material agreement termination

Arete, then repositioning itself towards energy, locked up a 45-day exclusive right to buy three oil and gas drilling and re-work prospects in Texas and Oklahoma - but had not yet found anyone to fund them.

material agreement

Shareholders approved a 1-for-20 share consolidation, cutting shares on issue from 498 million to 24.9 million while leaving the 500 million authorised limit untouched - so most of the dilution capacity was preserved. The same meeting settled claims with chief executive Thomas Raabe and a former officer and adopted a new option plan.

security holder rights change