EL CAPITAN PRECIOUS METALS INC

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.

auditor change

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.

financial restatement

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.

capital raising announcement

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.

capital raising announcement

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.

capital raising announcement

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.

capital raising announcement

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.

material agreement

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.

capital raising announcement

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%).

asset acquisition disposition

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).

business combination

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.

capital raising announcement

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.

material agreement

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.

business combination

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.

business combination

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.

business combination

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.

capital raising announcement

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.

capital raising announcement

The company reported several unregistered share issuances: $50,000 for 200,000 shares (September 2004), and a November 5, 2004 private placement of 2,110,000 units for $1,055,000, each unit being a share plus a warrant at $0.75. It also issued a 500,000-share warrant at $0.85 to Blake Advisors for advisory services, and 1,536,859 shares to Asia Finance Company LLC under an agreement to find iron ore buyers. These issuances add to the share count, diluting existing holders.

capital raising announcement

On March 18, 2003 the shell company DML Services, Inc. acquired El Capitan Precious Metals, Inc. (a Delaware company) for 13,000,000 new shares, giving the El Capitan holders 85% of the company, and took the El Capitan name. The day before, it sold its catering and foodservice business to two of its officers (Michael and Deborah Flores) for the return of 10,040,000 shares plus $50,000 cash. The company now owns a 40% interest in the El Capitan mine near Capitan, New Mexico; this explains the earlier late-filing notice and registered offerings now sitting under a new business. Financial statements and pro forma figures were promised in a later amendment.

asset acquisition disposition