History
A payments company that swapped into gas by buying Gasco preferred stock, then raised small sums, spun off its Texas assets and won shareholder approval to be acquired by Gasco.
2001-2002: From payments to gas
In 2001 the company was First Ecom.com, a payment processing business. In June it paid the Bank of Bermuda $4.25 million from working capital for the half of First Ecommerce Data Services Limited (FEDS) it did not own, saying this showed commitment to payments despite a planned deal with Gasco Energy. The plan then changed. In July it paid $19 million for Gasco Series A Preferred Stock, convertible into 9.5 million Gasco common shares, carrying 26% of Gasco's combined voting power. This replaced the planned merger, and the company said it intended to become a gas business. The stake came with board seats on each side and a three-year limit on selling.
In October 2001 it sold all of FEDS, completed on October 22. It received US$1.66 million upfront and US$1.34 million as loan repayment, plus 40% of FEDS's net operating profit for three years, guaranteed at between $2 million and $3 million. The company was renamed BREK Energy Corporation, filed on January 31, 2002. It also adopted a shareholder rights plan, a defence that lets holders buy extra shares cheaply if someone takes 10% or more without board approval. It runs to December 31, 2020.
2003-2005: Small raisings
The record is quiet for these years. In December 2004 BREK disclosed private share sales made during 2004, each selling a share with a warrant, at prices from $0.05 to $0.20. They raised several hundred thousand dollars at a time, including $437,500, $700,000 and $765,000. Shares were also issued to settle about $68,750 of debts and, with warrants, to acquire an oil and gas well valued at $279,392. These issues diluted existing holders.
2006: Rocksprings and the Gasco deal
In March 2006 BREK corrected an auditor change filing: its previous auditor's 2003 and 2004 reports had carried a going concern warning, meaning doubt about whether the company could keep operating. In May its Vallenar Energy subsidiary signed a letter agreement with Chesapeake Exploration to develop the Rocksprings Prospect in Texas. Chesapeake could earn 75% by drilling, with Nathan Oil able to back in for 25% after the first 10 wells recovered their costs.
On September 20 BREK agreed to be acquired by Gasco, issuing 11 million Gasco shares for all BREK common shares on a fully diluted basis. A $1.0 million termination fee plus up to $1.0 million of expenses could apply. Insiders, including CEO Richard Jeffs with about 18%, agreed to back the deal. Soon after, BREK cut the price of all 18,534,460 warrants to one-third of their original $0.25 to $0.90 for a limited window to October 31, which could have brought in about $2.3 million.
2007: Spin-off and approval
The merger was amended on January 31, May 29 and October 22. In October 2007 directors and the CEO's wife bought 937,500 shares at $0.16 for $150,000. On November 30 BREK completed the spin-off of Rock City Energy, which holds Vallenar and the Rocksprings interests, a condition of the merger. Holders of 1,000 or more shares received 8,000,000 Rock City shares in total; others received $0.022 per share in cash.
On December 12 shareholders approved the merger, with 61,563,110 shares voting in favour, more than 76% of those outstanding. On December 14 BREK deregistered its securities, ending its duty to file reports with the SEC. The filings do not say the merger had closed.
Written from the 12 story beats below (2001 to 14 Dec 2007), which come from the company's own announcements and filings.