CIRCLE STAR ENERGY CORP.

On August 18, 2014 the company said its 10-Q for the quarter ended January 31, 2014 should no longer be relied on. The gain on the January 2014 royalty sale was overstated: it was restated from $1,728,235 to $1,232,279, and nine-month depletion expense from $134,685 to $496,659. Net income for the three months falls from $1,566,415 to $708,485, and for nine months from $1,089,117 to $231,187. The errors were found during the audit of the April 30, 2014 statements, and an amended 10-Q is expected.

financial restatement

On February 28, 2014 the company settled with Mediapark and Soloman, holders of the 10% convertible notes due February 8, 2013 (originally $1,375,000 each), who had sued in October 2013 to force payment. The company paid $500,000 to each and issued new $1,155,000 notes at 12% due December 31, 2014, guaranteed by JHE and secured on oil and gas properties; 70% of proceeds from any further JHE asset or NPI sales must go to the noteholders. It also agreed to issue 2,500,000 shares to each holder (the CEO votes them for six months and the company can buy them back at $0.15) plus two-year warrants for 2,500,000 shares each at $0.05, exercisable from February 1, 2015. The lawsuit is to be dismissed once the deeds of trust are filed, and the old notes cancelled. This resolves the overdue 2012 notes thread but adds dilution and a new debt deadline.

capital raising announcement

On January 24, 2014 the company sold all its royalty and overriding interests in properties held by its subsidiary JHE Holdings (in Madison, Grimes, Dimmit and Fayette Counties, Texas) for $2,000,000 cash to three unrelated buyers: GOC Madison, AshTan Royalties and WABR. The filing says most of the proceeds are being used to reduce debt and accounts payable. JHE itself is still owned by the company; only these royalty and overriding interests were sold.

asset acquisition disposition

Holders of the February 2012 10% convertible notes agreed to extend maturity from Feb 8, 2013 to Sept 30, 2014, but only if the company closes a $5,000,000 financing within 90 days (extendable in 30-day steps at the holders' discretion); otherwise the original terms stand. The company issued 250,000 shares now and owes another 250,000 shares on closing of the financing. Interest since May 1, 2012 is paid at closing, then monthly. The extension depends on a financing that has not happened yet.

capital raising announcement

The company amended an April 17, 2012 agreement with BlueRidge Petroleum and other sellers for Kansas leases. It now pays $50,000 (already paid) and issues 2,611,000 shares for the Sheridan County interests, and gets an option, exercisable by Sept 28, 2012, to buy interests in 80,871 acres (including Rawlins and Graham Counties) for $10,108,875 in cash plus shares worth $1,000,000. This replaces the original $5,308,375 plus 560,000 shares deal and brings a large share issuance for Sheridan. The option is not an obligation, and the filing does not say how the cash would be funded.

capital raising announcement

All 4,800,000 warrants from the June 2011 unit placement were exercised at $0.50, bringing in $2,400,000 and issuing 4,800,000 new shares. The company says it intends to use the money for debt repayment, acquisitions and/or general purposes. This adds cash but dilutes existing holders by the new shares.

capital raising announcement

The company agreed to buy Wevco Production's working interests in oil and gas leases of up to 64,575 net acres in Gove and Trego Counties, Kansas, for $5,000,000 at closing plus 1,000,000 shares. It paid a non-refundable $100,000 at signing and owes another $200,000 by March 15, 2012, both credited against the price. This is a new Kansas acquisition thread; the filing does not say how the $5,000,000 will be funded. The company's address also moved to Fort Worth, Texas.

material agreement

The company terminated the planned $9,350,000 sale of JHE to Colonial Royalties on Feb 6, 2012 after Colonial missed the $2,100,000 payment due Jan 29; only the first $100,000 had been received. The company withdrew its shareholder-consent information statement and says it no longer has corporate authority to proceed with that sale, though it keeps the right to pursue Colonial for breach. This resolves the JHE sale announced in January: it did not happen, and the company still owns JHE.

material agreement termination

The company issued $2,750,000 of 10% convertible notes (due Feb 8, 2013, convertible at $1.50 per share) and used the proceeds to make the $2,000,000 December 2011 payment to the Edsels on the JHE note, which had been missed and extended twice (a $100,000 payment bought the first extension). The Edsels also pushed the March 2012 payment to April 30, 2012. In return the noteholders get a pledge over JHE and a 3.5% overriding royalty in certain properties the company may acquire, and the company dropped the clauses that would release JHE oil and gas properties from the Edsels' pledge as the note is paid down. The company says it is current on the note after the Feb 8 payment.

capital raising announcement

The company agreed on December 30, 2011 to sell 100% of its JHE Holdings interests, the assets bought in June 2011, to Colonial Royalties, LLC for $9,350,000. Payments are $100,000 received December 30, then $2,100,000, $3,200,000 and $3,950,000 due in January to March 2012, with the transfer happening March 29, 2012. Of the total, High Plains, owned by CEO and director S. Jeffrey Johnson, gets $935,000 for its retained 10% profits interest in JHE, and a majority of shareholders consented in writing. This reverses the JHE acquisition less than seven months after it closed. The same filing reports that the company dismissed auditor Silberstein Ungar, PLLC around October 17, 2011 (no disagreements reported; its earlier reports carried going concern uncertainty) and engaged Hein & Associates LLP, effective November 1, 2011.

auditor change

Now named Circle Star Energy Corp., the company issued $1,500,000 of 6% convertible notes due September 14, 2014, convertible at $1.50 per share, sold to non-U.S. investors. The filing says the proceeds went toward the $1,500,000 September 1, 2011 installment on the JHE promissory note, which addresses the funding gap flagged in June. The filing says only that the proceeds paid 'a portion' of that installment.

capital raising announcement

Digital Valleys Corp. closed its purchase of JHE Holdings, LLC from High Plains Oil, LLC on June 16, 2011. JHE owns small working and revenue interests in producing Texas oil and gas wells, with up to a 5% working interest in some properties. In exchange the company issued 1,000,000 shares to High Plains and 600,000 shares to the Edsels, paid $1,000,000 at closing, and took over a $7,500,000 promissory note at 5% interest to the Edsels (the sellers of JHE to High Plains) that is secured by a pledge of all JHE interests. The filing states the company lacks the cash for the next $1,500,000 payment due September 1, 2011 and needs new financing, or it could lose some or all of the JHE properties. Separately, the filing reports a private placement closed June 15, 2011 of 4,800,000 units at $0.25 each, each unit being one share plus one warrant.

asset acquisition disposition