Each one in plain English, with the numbers worked through for a shareholder.
9 Feb 2018auditor change▼ BadMajor
MaloneBailey resigned as auditor on February 5, 2018 (the audit committee did not recommend it) and Semple, Marchal & Cooper was engaged February 7, 2018 for the fiscal year ended September 30, 2017; no audit report for that year had been issued. MaloneBailey said it wanted a legal opinion that using Form S-8 for 9.5 million shares issued to David Davidson (owner of HKM Minerals, which runs the Phoenix pilot plant, issued in lieu of cash advances under a Dec 6, 2016 agreement) was proper, and the company could not get one without undue effort or expense. The company believes the use was lawful but says buyers of those shares could claim rescission rights for one year; this links to the pilot plant costs in the restatement.
On January 24, 2018 the audit committee concluded that the quarterly reports for the quarters ended Dec 31, 2016, March 31, 2017 and June 30, 2017 should no longer be relied on. Pilot plant costs in Phoenix, Arizona had been booked as assets (advances to vendor) but will be treated as expenses, adding about $336,000, $435,000 and $503,000 to the net loss of those quarters respectively. The company plans to amend those 10-Qs; this means the previously reported losses (e.g. the $784 thousand loss reported Feb 2017 for the Dec 2016 quarter) were understated.
On December 18, 2017 the company issued L2 Capital a $99,000 convertible note (it received $90,000; $9,000 was kept as discount), 7% interest, due June 18, 2018, and also gave L2 Capital 1,250,000 shares as a commitment fee. After a default the note converts at the lesser of $0.07 or 60% of recent low prices, with a full-ratchet price reset, a 140% default payment, a most-favored-nations clause and a right of first refusal on other financings for L2 Capital. It adds to the L2 Capital relationship begun with the Feb 2017 equity line.
On February 21, 2017 the company issued a $550,000 convertible note (7% interest, due August 21, 2017, convertible at $0.0913 per share) to an investor, with $100,000 advanced up front and a warrant for 602,406 shares at $0.3652. Further advances need mutual agreement, and on a default the amount owed rises 140% and the conversion price drops to 60% of recent low prices, which could mean many more shares. It also ended the River North $5,000,000 equity line (amended Dec 9, 2016) and replaced it with a new $5,000,000 line with River North's affiliate L2 Capital, running to February 21, 2020, with a registration statement for resale owed within 45 days.
On December 9, 2016 the company amended the River North equity line so the pricing window runs up to the settlement date instead of the put date. An extra 10% discount applies if the closing bid is under $0.10 or average daily dollar volume is under $50,000, in addition to the existing discounts. The $5,000,000 limit is unchanged. These changes mean shares would be sold at lower prices, so more shares for the same money. The company's address is now Prescott, AZ.
On March 16, 2016 the company signed a new equity line with River North Equity letting it sell up to $5,000,000 of shares through March 16, 2018, at 85% of a low-bid market price, in puts of $5,000 to $150,000 unless River North approves otherwise. It also issued River North two convertible notes: a $35,000 commitment note and a $90,000 bridge note (it received $81,000). Both carry 10% interest and mature March 16, 2017, and are convertible at 60% of the lowest recent bid. The terms are steeper discounts than the Southridge deals and could mean more dilution.
On August 1, 2014 the company issued 51 Series B preferred shares at $1.00 each to John F. Stapleton, who signs the filings as CFO. These shares carry about 51% of the voting power, but only on capitalization matters (such as share counts and reverse splits) and name changes. The shares are otherwise not entitled to vote and get no dividends. Ordinary shareholders keep their economic rights but could be outvoted on those matters.
On July 30, 2014 the company signed a second Equity Purchase Agreement with Southridge, allowing it to sell up to $1,900,000 of new shares through July 30, 2016, on the same terms as the 2011 deal (94% of market price, $500,000 cap per sale). The company has no obligation to sell. This follows the 2011 agreement, which was due to end July 11, 2014 (the filing does not say how much of it was used).
The company signed a life-of-mine agreement on March 10, 2014 to sell iron ore from the El Capitan property to Glencore AG, at an index price less a discount, paid by letter of credit. It also signed logistics and processing agreements with Logistica U.S. Terminals, effective February 28, 2014. Logistica is to fund costs and gets a share of iron ore profits, and the company must cover any loss on a sale from precious metals profits or otherwise. Logistica also paid the remaining $900,000 for an ore separation line, in return for a $400,000 note at 4.5% and shares issued under the 2005 plan. This is a new iron ore line next to the earlier precious metals work.
On April 3, 2013 the company extended Southridge's $5,000,000 share purchase commitment by one year, to July 11, 2014; the maximum is unchanged. The filing says $2,750,000 of it had already been sold as of that date, which continues the 2011 funding arrangement and leaves $2,250,000 of capacity (arithmetic from the filing's figures).
12 July 2011capital raising announcement● NeutralMajor
On July 11, 2011 the company signed an Equity Purchase Agreement with Southridge Partners II letting it, at its option, sell up to $5,000,000 of new shares through July 11, 2013. Southridge pays 94% of a market price based on the two lowest closing bids in a five-day window, each sale is capped at the lesser of $500,000 or 250% of average daily dollar volume, and the company issued 80,000 restricted shares to Southridge as a fee. The company has no obligation to sell, and any sales would add shares and dilute existing holders.
26 Jan 2011asset acquisition disposition● NeutralMajor
The Gold and Minerals stockholders approved the merger on January 18, 2011, and the Articles of Merger were filed in Nevada on January 19, 2011. This completes the merger pending since 2008 and revived in June 2010: the company now owns 100% of the El Capitan property in New Mexico (previously 40% via ECL). It expects to issue about 148,065,000 new shares to G&M holders, most restricted from transfer for 90 days and the rest of the first year, so existing holders are diluted (the earlier S-4 put G&M holders at about 60.7%).
On November 10, 2010 the company filed Amendment No. 1 to the merger Form S-4 under registration number 333-170281. The visible text repeats the original terms (about 148,065,000 shares, about 60.7% to G&M holders, about 1.4073 shares per G&M share) and I can't see what changed from the part provided. The merger still awaits SEC effectiveness and a G&M stockholder vote.
On November 2, 2010 the company filed the Form S-4 for the Gold and Minerals merger that it had delayed since July 2008. It registers up to 148,065,000 shares, to be issued at 1.5 times the company's shares outstanding plus those under warrants and options, about 1.4073 shares per G&M share, and G&M holders would own about 60.7% of the company. The draft leaves dates and some numbers blank, and G&M's stockholders still must vote; the SEC has not yet reviewed it. Existing holders would be diluted to about 39% (inference from the 60.7% figure).
7 July 2010capital raising announcement● NeutralMajor
On June 28, 2010 the directors of the company, Gold and Minerals and a merger subsidiary (MergerCo) signed a new Agreement and Plan of Merger, reviving the merger that stalled in 2008. The company estimates about 144-148 million new shares would go to G&M holders, giving them about 60% of the company (versus about 56% in the February 2008 deal); the new terms mean the company would own 100% of the El Capitan property owner, ECL. Charles Mottley is a director of the company, G&M and MergerCo. Separately, from May 25 to July 2, 2010 it sold restricted shares for $50,100 (143,144 shares) and $877,066 (2,505,903 shares) to investors, leaving 93,983,742 shares outstanding at July 2, 2010. A Form S-4 is still to be filed.
On May 12, 2010 the company entered a joint venture with Planet Resource Recovery to process about 200 tons of concentrate, made several years ago at the El Capitan property, at a Planet plant in the Houston area. Recovered precious metals are to be sold and net profit or loss split equally after costs; Planet owns the technology used. The press release now names Chuck Mottley as President and CEO, and the company address is Scottsdale, AZ, and the filing shows Stephen Antol as CFO again, so leadership has changed since 2008 (Pavlich/Wilson). The company also describes a 20% ownership in 13 mining claims (C.O.D. mine near Kingman, Arizona), not previously in the context.
On July 30, 2008 the board raised the number of shares available under the 2005 Stock Incentive Plan from 11,000,000 to 16,000,000. This allows up to 5,000,000 more shares to be granted under the plan, which could dilute existing holders as awards are made; the filing gives no grants or recipients.
On July 23, 2008 the company said the Gold and Minerals merger is ready for a Form S-4 filing but it will delay that filing until enough funding is raised to cover accrued and future merger expenses. The company said it had expected the merger to be complete by now, but due diligence delays (mainly obtaining current audited G&M financial statements and documents on historical G&M transactions) raised costs. This continues the merger thread and pushes it past the May 1, 2008 outside date in the February 2008 agreement; no new closing date is given.
20 June 2008asset acquisition disposition● Neutral
On June 18, 2008 the company ended Charles Mottley's October 2007 consulting agreement, settling the $267,500 balance owed with 445,833 unregistered shares plus other assets worth about $6,000. This closes out the consulting arrangement and pays it in shares rather than cash.
On February 12, 2008 the company signed the definitive merger agreement with Gold and Minerals (and Larry Lozensky), turning the August 2007 agreement in principle into a signed deal: it would issue 118,965,000 shares (subject to a working capital adjustment), leaving Gold and Minerals holders with about 56% of the company on a fully diluted basis. This would give the company 100% of El Capitan Ltd. Closing needs Gold and Minerals shareholder approval and regulatory approval, and either party can terminate if it hasn't closed by May 1, 2008. About $1,000,000 of shares issued to Lozensky go into escrow for indemnification claims; existing holders are diluted to a minority share of the combined company.
On October 1, 2007 the company signed a consulting agreement with Charles Mottley, who resigned as Chairman on September 26, 2007, for a total fee of $300,000: a $25,000 payment once cash exceeds $250,000, then monthly payments of $2,500 to $10,000 depending on cash on hand. If the company ends it without cause it must pay the fee for the remaining term. Mottley's departure from the board continues the leadership change.
On August 8, 2007 the company announced agreement in principle on merger terms with Gold and Minerals, holder of the other 60% of El Capitan Ltd: it would issue about 118.965 million shares for all Gold and Minerals stock, giving about 198.3 million shares outstanding against about 79.3 million at June 30, 2007. Still subject to a definitive agreement, due diligence, Gold and Minerals shareholder approval and an effective registration statement, with completion expected by year-end. The company's address is now Reno, Nevada and the CEO and CFO named are Ken Pavlich and R. William Wilson.
Effective March 27, 2007 Epstein Weber & Conover resigned as auditor because it combined with Moss Adams on January 1, 2007; the company engaged Malone & Bailey on April 6, 2007. Epstein Weber's reports for fiscal 2005 and 2006 carried going-concern doubt, with no disagreements. This is the third auditor in about two and a half years; the filing attributes this change to the firm's combination.
On February 21, 2007 Whitebox converted the remaining $450,000 of principal on the original $750,000 note into 900,000 shares at $0.50, issued without commission. This adds shares for existing holders to share the company with, and removes that part of the debt. The filing does not mention the $550,000 January 2006 note.
26 Jan 2006capital raising announcement● NeutralMajor
On January 20, 2006 Whitebox exercised its option to lend the further $550,000 via an 8% secured convertible note (convertible at $0.50, interest-only monthly until July 2006, all due July 20, 2007) plus a warrant for 366,667 shares at $0.60. The subsidiary also granted Whitebox a security interest in its assets, and the company must file a resale registration statement. This resolves the option thread and adds to dilution potential and secured debt.
On January 1, 2006 El Capitan, Ltd. (the 40%-owned entity) bought four patented mining claims (about 77.5 acres in Lincoln County, New Mexico) on the mine property, paying with 2,100,000 company shares held by Gold and Minerals, valued at $0.82 each. The company owes Gold and Minerals about $688,800 as its share and says it intends to offset this against amounts Gold and Minerals already owes it.
On December 28, 2005 the company signed the definitive rights agreement with OTR, Inc. as Rights Agent, completing the shareholder rights plan declared December 7. The rights trigger at 15% ownership without board approval, carry a $20.00 exercise price, can be redeemed by the board for $.001 each, and expire after ten years.
On December 7, 2005 the board declared a shareholder rights dividend (a 'poison pill'): one right per share for holders of record on December 16, 2005, subject to signing a definitive agreement. The rights become exercisable if someone acquires 15% or more of the voting power without board approval, letting other holders buy shares at a discount; the board can redeem them for $0.001 each. This makes a hostile takeover harder; it does not change the business.
On November 25, 2005 the company dismissed Hein & Associates, hired a year earlier, and engaged Epstein Weber & Conover PLC as auditor. The filing says Hein's reports included a going-concern qualification for fiscal 2004 and that there were no disagreements. This is the second auditor change in about a year, continuing the October 2004 change.
3 Nov 2005capital raising announcement● NeutralMajor
On October 28, 2005 the company borrowed $750,000 from Whitebox Intermarket Partners through an 8% secured convertible note (convertible at $0.50, due April 28, 2007) plus a 500,000-share warrant at $0.60, secured by the company's assets. Whitebox also has an option until April 28, 2006 to lend a further $550,000. Separately, it sold 2,353,333 more units at $0.40 in its ongoing private placement, bringing the total to 3,593,333 units, with $1,112,790 in net cash plus $300,000 of debt converted. This is the first secured borrowing in the history here, and the convertible note and warrants could dilute shareholders.
