Each one in plain English, with the numbers worked through for a shareholder.
29 May 2014business combination● Neutral
This amends the November 2013 Natural Resource Group deal report. It adds that Philip Grey stayed on as a director until April 24, 2014 and agreed to take on Diversified's roughly $58,000 of liabilities at the deal date. It also updates the asset details: the Energy Oil and Gas note had $107,070 of principal at April 30, 2014 (up from $78,000 at July 31, 2013 in the earlier context), the Garcia Field has four producing wells plus one injection well, the Denver-Julesburg Basin shows 920 acres in the description (the earlier context said about 1,400 acres), and a 2012 lender holds a 1% royalty and a 20% net profits interest in Garcia, in return for a $250,000 loan.
The company disclosed private share sales: 193,750 shares at $0.80 on December 20, 2013, and 1,144,000 shares at $0.50 between December 21, 2013 and May 15, 2014, with no commissions paid. The later sales were priced lower than the first, and the new shares further dilute existing holders and are restricted from resale. The filing does not state the total proceeds or what they will be used for.
What it means for a shareholder
193,750 new shares at $0.800 to raise about $155,000. That's 1.0% dilution: every existing holder's slice gets 1.0% smaller. If you held $1,000 of shares (1,250 at the issue price), your slice goes from 0.00678% to 0.00671% of the company. To keep it you'd need 13 more shares - about $10 at the issue price.
This restates the December 2013 auditor change from the viewpoint of Natural Resource Group, which for accounting purposes is treated as the acquirer in the November 2013 deal. It adds that Malone Bailey's reports for fiscal 2011 and 2012 contained going-concern doubt, and that Malone Bailey's letter is now filed as an exhibit. Kingery & Crouse remains the new auditor.
Following the Natural Resource Group deal, the company dismissed Malone Bailey, LLP on December 12, 2013 and engaged Kingery & Crouse, P.A. on January 6, 2014. The filing says Malone Bailey's reports had no adverse opinion and no disagreements were reported, and its confirming letter was to follow by amendment.
On November 21, 2013, Diversified Resources acquired all of Natural Resource Group, Inc. for 14,558,150 new shares, after which Natural Resource Group's former shareholders own 85% of Diversified. Natural Resource Group brings Colorado oil and gas leases: about 4,600 acres in the Garcia Field (100% working interest) and 1,400 acres in the Denver-Julesburg Basin, plus a 640-acre D-J lease acquired in 2013. Management changed (Paul Laird, Duane Bacon, Roger May and Albert McMullin appointed; Philip Grey resigned and sold back 2,680,033 shares). Existing shareholders are heavily diluted, and the gas wells were still not connected to a pipeline; the filing estimates about $1,000,000 for a gathering line.
This amendment adds Anton & Chia's response letter (Exhibit 16.1, dated May 20, 2013) to the earlier filing about its dismissal and the hiring of MaloneBailey. The text is otherwise the same; the filing does not state what the letter says.
The company dismissed Anton & Chia LLP on May 20, 2013 and engaged MaloneBailey, LLP (engaged May 14, 2013), after only about five months with Anton & Chia. The auditor's report on the year ended October 31, 2012 carried a going-concern doubt citing negative working capital and negative operating cash flows. The filing reports no disagreements, and Anton & Chia had not yet replied with its confirming letter.
This amends the December 2012 auditor-change filing: it now covers the fiscal years ended October 31, 2010 and 2011 (both with going-concern doubt noted) and adds that the executive office address is 2114 Ridge Plaza Drive, Castle Rock, Colorado, effective December 20, 2012. The auditor change itself (Kinross-Kennedy to Anton & Chia) is unchanged.
Auditor John Kinross-Kennedy resigned effective December 13, 2012, and Anton & Chia, LLP was engaged in its place. The filing says Kinross-Kennedy's report on the year ended October 31, 2011 included a going-concern doubt, and reports no disagreements with the former auditor. The company's address also moved from Calgary to Lone Tree, Colorado.
On April 16, 2012, Diversified Resources signed lock-up agreements with three major shareholders (Thomas Hewitt, Beverly Munro, Norman MacKenzie) who together hold 1,100,000 shares, about 20.95% of the company. For twelve months they may sell no more than 52,500 shares every three months (cumulative), and for the following twelve months sales are subject to Rule 144 volume limits, which limits selling pressure from these holders.
