Hondo Minerals Corp company history: the story so far

History

Hondo Minerals became a mining company through a 2011 reverse merger, funded itself with share issues, and by August 2013 was weighing an $88 million Crowncorp offer.

2011-2012: A shell becomes a miner

On February 8, 2011, shell company Tycore Ventures bought Hondo Minerals, Inc. by issuing 22,103,000 new shares to Hondo's shareholders, who ended up with about 76% of the company. The business became a mining operation holding the Tennessee and Schuylkill mines in Arizona, plus claims in Colorado and Utah. Processing of the mines' tailings (leftover waste rock) was expected to start in middle to late 2011, and the company said it relied on outside funding until it earned cash.

In April 2011 it agreed to buy used equipment from 4SIBS Investment, LLC for $2,400,000. It paid $500,000 at closing on May 4, 2011, leaving $1.9 million due by June 10 and July 12, 2011. The filing did not say what the equipment was for, and the record does not confirm later payments.

The record is then quiet until April 2012, when the company issued 6,500,000 shares to Ironridge Global IV, Ltd. to settle $1,648,554.39 of unpaid bills Ironridge had bought from creditors. The court-approved deal allowed more shares to follow, up to a 9.99% ownership cap, so further dilution was possible. Shares on issue rose from 62,425,190 at the end of 2011 to 83,730,667 at the end of 2012.

2012-2013: Takeover offers and a restatement

On November 20, 2012, Magnolia Hill, LLC made an unsolicited offer of $0.62 per share in cash and stock. The board rejected a proposed $250,000 deposit tied to a 120-day no-shop clause, and no later filing followed. On December 11, 2012, Crowncorp Investment Corporation offered $75 million in cash for the subsidiary holding all the assets, and the board authorised due diligence.

On April 25, 2013, the company signed a letter of intent with Crowncorp for an all-cash $88 million purchase of all its assets and shares. It depended on a tender offer and a definitive operating agreement, and carried a $2 million break-up fee. The first deposit was moved to May 10, 2013. The tender offer had not started and the board had not made a recommendation.

On August 6, 2013, the company disclosed that its financial statements for the year ended July 31, 2012 could no longer be relied on. A share-paid lawsuit settlement, apparently the Ironridge deal, was reclassified as a $1,668,554 liability, with a derivative liability also needed. Corrected accounts had been filed on December 21, 2012. By then shares on issue had reached 137,771,654.

Written from the 7 story beats below (2011 to 6 Aug 2013), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

shares on issue market cap (log scale)

2013138m shares · US$10.2m market cap

6 Aug
The company disclosed that its financial statements for the year ended July 31, 2012 should no longer be relied on, after notice from its accountant on or about December 13, 2012. A lawsuit settlement paid in shares, originally booked as equity, was reclassified as a $1,668,554 liability because the number of shares to be issued is not fixed, and a derivative liability/expense was also needed. The restated accounts were already filed in a 10-K/A on December 21, 2012, so this 8-K is a late disclosure; the lawsuit settlement appears to be the Ironridge arrangement (an inference).
financial restatement
138m shUS$10.2m
2 May
On April 25, 2013 the company signed a letter of intent with Crowncorp Investments Corporation for an all-cash $88 million purchase of all its assets and shares, up from the $75 million Crowncorp offer of December 2012. It depends on a tender offer to shareholders and a definitive operating agreement giving Crowncorp management and control. Payments are $1.6M, $1.6M and $2.8M to the company in stages, then $69M to shareholders (plus the balance left after certain debts are paid) and $13M to the company on completion of the tender offer. If the deal does not close within six months, or Crowncorp fails to pay or repudiates, Crowncorp owes a $2M break-up fee and money already advanced is treated as a senior secured loan to the company (net of the fee). An April 30 addendum moved the first deposit from April 29 to May 10, 2013. The tender offer has not started and the board has yet to make a recommendation.
material agreement
100m shUS$11.1m

201283.7m shares · US$11.7m market cap

18 Dec
On December 11, 2012 the company received a second unsolicited offer, from Crowncorp Investment Corporation, to buy its subsidiary Hondo Minerals, Inc. (which holds all its assets) for $75 million in cash. The board authorised management to run due diligence and aim for definitive agreements within 60 days; nothing is binding yet, and this is an alternative to the earlier Magnolia Hill offer.
business combination
83.7m shUS$11.7m
30 Nov
On November 20, 2012 the company received an unsolicited offer from Magnolia Hill, LLC to buy all its stock and assets at $0.62 per share in cash and stock, under a letter of intent subject to due diligence and requirements such as a 43-101 reserve report. The board rejected a proposed $250,000 deposit tied to a 120-day no-shop clause; no definitive deal exists yet.
business combination
83.7m shUS$11.7m
25 Apr
On April 19, 2012 the company issued 6,500,000 shares to Ironridge Global IV, Ltd. to settle $1,648,554.39 of its accounts payable that Ironridge had bought from creditors, under a court-approved settlement. The settlement allows more shares to be issued later depending on trading volume and share price (capped at 9.99% ownership by Ironridge), so existing shareholders may be diluted further.
capital raising announcement
66.3m shUS$31.8m

2011

9 May
On April 28, 2011 the company agreed to buy used equipment from 4SIBS Investment, LLC for $2,400,000, payable $500,000 within 24 hours (paid, closing May 4, 2011), $900,000 by June 10, 2011 and $1,000,000 by July 12, 2011. This creates $1.9 million of remaining payment obligations; the filing does not say what the equipment is for.
asset acquisition disposition
9 Feb
On February 8, 2011, shell company Tycore Ventures (later Hondo Minerals Corp) bought 100% of Hondo Minerals, Inc. by issuing 22,103,000 new shares to Hondo's shareholders, who now hold about 76% of the company. The business became Hondo's mining operation (Tennessee and Schuylkill mines in Arizona, plus claims in Colorado and Utah); the filing says tailings processing is expected to start in middle to late 2011 and the company depends on outside funding until it generates cash flow.
business combination