Each one in plain English, with the numbers worked through for a shareholder.
29 Dec 2015material agreement● NeutralMajor
On December 28, 2015 the company, through its subsidiary HERC, LLC, signed an agreement to acquire Monroad LLC, a Mongolian road construction and earth moving company, from its sole shareholder. In exchange it would issue 1,000,000 shares of 6% Series A Convertible Preferred Stock (face value $16 million), convertible into 16 million common shares, or about 49% of the outstanding shares at closing, so existing shareholders would be diluted if it completes. The deal is not final: it depends on due diligence, converting certain company debt to equity, a $2.00 per share trading price, and enough funding for the combined business plan (some conditions can be waived). Monroad's 2014 audited revenue was reported as $19,214,805, and the company says this adds to its Hertz franchise plans in Mongolia, which have not yet been shown to have started.
On June 9, 2015 the company and Hydrocarbons Holdings settled a dispute with B&J Oil Company over costs from its Kentucky oil production. B&J is owed $412,270.73, paid from Kentucky crude oil sale proceeds, with Hydrocarbons responsible for any shortfall, and the company issued B&J 130,000 restricted shares. The company says it was never served with a complaint and the case was dismissed with prejudice.
On January 22, 2015 the subsidiary Rental Equipment, LLC signed a loan agreement with XacBank for a credit line of up to $10,000,000 over 60 months at 12% interest, to buy equipment for the Hertz franchise. It can fund up to 80% of equipment cost, requires rental agreements before funds are released, and is secured by a pledge of the equipment bought. The parent company guarantees all of the borrower's obligations and must keep a 1.2 debt service coverage ratio. The press release calls it the first $10 million of a proposed $40 million line, and the company says it will look for more funding with no assurance of getting it.
On December 16, 2014 the Hertz franchise agreement was amended to move the start date from July 1, 2013 to December 31, 2014. The franchise therefore had not started on the original date (inference from the change). The filing gives no reason.
Mongolia Holdings parted company with its auditor GBH CPAs, which confirmed it had no quarrel with the company's account of the change. The incoming firm is not named in the surviving exhibit.
On March 21, 2013 the company's subsidiary Mongolia Equipment Rental Corporation signed a 10-year Hertz Equipment Rental franchise agreement for Mongolia, starting July 1, 2013, with two 5-year renewal options. It pays a $45,000 initial fee and a monthly fee of 6% of gross revenue (minimum $135,000 a year). Hertz may not license another equipment rental business in Mongolia, and the company gets a right of first opportunity for Burma (Myanmar). This is a new business line alongside the oil and gas assets.
On February 21, 2013 the company agreed to transfer substantially all of its oil and gas assets and liabilities to its wholly owned subsidiary Hydrocarbons Holdings, Inc., effective February 28, 2013. The assets stay inside the group but are now held in a separate subsidiary.
Effective February 1, 2013 the company signed one-year consulting agreements (to January 31, 2014) with Brady Strahl as President and Sean Kirwan as Vice President and in-house counsel, each for up to 20 hours a week. Each receives 200,000 shares, so 400,000 shares are being issued. The filing is signed by Gary Kucher as CEO and President, and it does not say whether Strahl replaces him as President.
The company amended Carl Casareto's December 2012 consulting agreement to give him 200,000 more shares of common stock as extra incentive pay, saying he is proving a valuable addition to management.
Effective January 1, 2013 Richard S. Polep continues as CFO under a one-year consulting contract (to January 1, 2014). He is granted 400,000 shares for serving as CFO from August 8, 2011 to December 31, 2012, plus another 400,000 for the new term, which adds 800,000 shares in total.
Effective December 1, 2012 the company hired Carl Casareto as Chief Operations Officer on a one-year consulting contract (to December 1, 2013) at $7,000 a month for up to 20 hours a week. He can earn a 25% bonus on annual base pay if the company reaches $5M revenue, $1M EBITA, or $3M of annual funding.
4 June 2012asset acquisition disposition▼ BadMajor
Second amendment to the report on the April 1, 2010 purchase of oil and gas well interests from 12 Leland-managed partnerships in Kentucky and Tennessee. It now says the price was 22,786,872 restricted shares (earlier context said 23,216,729) for assets valued at about $4,355,000, not the ~$15,555,000 originally used, after an updated reserve report; the SEC required the 2010 quarterly reports to be restated. It also adds audited Leland partnership financials, says the partnerships' limited partners were treated as approving the deal when ballots were not returned, and says Stephen and Pamela Thompson later resigned their positions in 2011. This continues the restatement thread and lowers the recorded value of the Leland wells.
This amendment quantifies the error in the January 2012 non-reliance notice: about $10.9 million, with net loss reduced by that amount, loss per share reduced by $0.32 and accumulated deficit reduced by $10.9 million (that is, the earlier results overstated losses). The company amended its 2010 annual report on February 9, 2012 to remove the withdrawn audit report and label the figures unaudited, and says it will file corrected annual and quarterly reports by February 29, 2012, citing limited resources.
The company says its December 31, 2010 annual accounts and the June and September 2010 quarterly accounts should no longer be relied on, because goodwill should not have been recorded or impaired given a final $4.3 million valuation; it plans to amend them. On January 25, 2012 its auditor GBH CPAs withdrew its April 14, 2011 audit report, citing the company's failure to make the amendments on time, to file a timely non-reliance notice, and to respond to SEC staff comments. The board's determination dates from July 26, 2011, so this disclosure came about six months later.
30 Dec 2011material agreement termination▼ BadMajor
The company was told by letter of December 27, 2011 that Elkhorn Goldfields' board decided it cannot complete the sale of Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. to the company's subsidiary CSI Resources under a May 2, 2011 stock purchase agreement (as amended). Neither side owes early termination penalties, and the company says it is pursuing alternative transactions. This deal was not in earlier context.
The October 2010 agreement to buy six California oil and gas fields from Grayson Services and RMR Energy Resources for $35 million terminated on December 31, 2010 under its own terms, so the deal did not close. The filing gives no reason and no mention of penalties.
On October 15, 2010 the company's subsidiary CSI Energy signed an agreement to buy six California oil and gas fields in Kern and Santa Barbara counties from Grayson Services and RMR Energy Resources for $35 million (the press release says all cash). The fields have 54 producing wells on over 2,250 acres, producing 265 barrels of oil and 485 mcf of gas per day. Closing was set for on or before December 31, 2010, conditional on the company obtaining financing and finishing due diligence. This follows a non-binding letter of intent announced June 1, 2010.
This amendment to the April 2010 Leland funds acquisition restates the deal: it now says 52 oil wells and 19 gas wells (up from 39 oil wells in the original). It records the purchase price at $7,421,910, based on a third-party reserve valuation and equipment appraisal, instead of the $15,555,208 first reported. It notes the shares had a quoted market price of $1.03 on April 1, 2010 (about $23.9 million in total). It also adds audited revenue and expense statements and pro forma financials for the acquired properties (figures are in exhibits not shown).
On April 1, 2010 the company (filing as Consolidation Services, Inc.) bought interests in 39 oil wells and 19 gas wells on about 1,500 leased acres in Kentucky and Tennessee from 12 oil and gas funds, paying 23,216,729 restricted shares valued at $0.67 each ($15,555,208). The shares are about 60% of the company, so control changed: Johnny Thomas and John Francis resigned as directors and officers (staying on an acquisition committee), and Stephen M. Thompson (president of the funds' manager's parent, Leland Energy) became Chairman and CEO, with Pamela Thompson as CFO and Gary Kucher as President. Existing shareholders were heavily diluted. The filing also says the company kept oil and gas rights on about 12,000 acres spun off to a subsidiary, Colt Resources, on January 1, 2010, with a 12.5% overriding royalty to Colt, and that funding to develop them is not assured.
The company said it reported in error that it had engaged Seale and Beers, and instead engaged GBH CPAs, PC effective September 17, 2009, including to re-audit the 2008 financial statements. This resolves the open auditor question after Moore & Associates' registration was revoked.
The company disclosed that the PCAOB revoked Moore & Associates' registration on August 27, 2009 for rule violations and non-cooperation with an investigation, and that Moore would not provide an updated letter to the SEC. It also says no engagement letter was signed with Seale and Beers and no new firm was retained; the new firm will also re-audit the 2008 financial statements.
Effective August 7, 2009 the company dismissed its auditor Moore & Associates and, on August 10, engaged Seale and Beers. The filing says Moore's reports had no adverse opinion but included a going-concern qualification, and that there were no disagreements. This was later corrected: the Seale and Beers engagement was reported in error.
This amendment to the September LeeCo report restates the $500,000 deal and adds that CEO Johnny Thomas loaned the company $66,500 at 6%, payable on demand, to cover the $50,000 cash plus audit and closing costs. It also says LeeCo has no subleases yet on its roughly 650 leased acres and is searching for third parties, with no assurances. It adds LeeCo audited financials and pro forma statements (the figures are in exhibits not shown here) and more detail on CFO John Francis's dealings with the company.
On September 22, 2008 the company closed the Eastern Kentucky Land Corp. option, resolving that open thread: it bought the oil, gas and other mineral rights on the Buckhorn property for $1,000,000 ($200,000 cash, with $50,000 of option payments credited, plus 415,584 restricted shares at $1.925, value guaranteed if the lock-up is followed). CEO Johnny Thomas loaned $150,000 for the cash due at closing, plus $50,000 earlier for the extension payments, both at 6% payable on demand. The filing says there is no assurance the resources exist in economic quantities.
The company agreed (effective June 19, 2008, signed September 11, closed September 16, 2008) to buy a 50% stake in LeeCo Development LLC from Billy David Altizer and Pat E. Mitchell for $500,000: $50,000 cash (provided by CEO Johnny Thomas) and 225,000 restricted shares valued at $2.00 ($450,000, value guaranteed if the lock-up is followed). LeeCo leases coal on about 650 acres, and the company gets its oil and gas rights (less a 1% interest kept by the two original owners). Altizer is also the Buckhorn and AMS figure from earlier deals. Separately, Helen Thomas resigned as Secretary/Treasurer and director, and CFO John Francis took over the Secretary/Treasurer role.
28 Aug 2008asset acquisition disposition● NeutralMajor
On August 25, 2008 the company exercised its option and bought about 1,000 acres in Owsley County, Kentucky from Larry Bruce Herald for $1,000,000: $500,000 cash, funded by a $513,655 demand loan from CEO Johnny Thomas at 6% interest, and a $500,000 non-interest note due October 15, 2008 secured by a mortgage on the land. It also agreed with AMS Development to handle coal permitting and mining plans, paying AMS $100,000 cash, 50% of the coal royalty rights and 200,000 restricted shares valued at $2.00 ($400,000) with a guaranteed value. AMS's managing member, Billy David Altizer, is also a managing member of Buckhorn, linking this deal to the Buckhorn thread.
30 June 2008asset acquisition disposition● Neutral
This amendment to the May 2008 Buckhorn report restates the 50% Buckhorn deal ($4.2 million: $550,000 cash paid, $1,550,000 in installments, 1,093,750 shares). It adds that as of June 1, 2008 the company bought Vector Energy Services, Inc., a shell with no significant assets, from its CFO John Francis, and plans to run its energy business through Vector. It also describes Buckhorn as planning to lease its coal to third-party miners for royalties rather than mine itself, and says the company holds the EK option on the underlying oil, gas and minerals.
27 May 2008asset acquisition disposition● NeutralMajor
On May 20, 2008 the company completed its purchase of a 50% stake in Buckhorn Resources LLC, which owns about 10,000 acres with coal rights in Eastern Kentucky, for $4.2 million. It paid $550,000 cash at closing, owes $1,550,000 in installments over twelve months, and issued 1,093,750 restricted shares valued at $1.92 each ($2.1 million), which adds to the share count; the company guarantees the share value if the lock-up is followed. This follows the earlier EK option on the oil, gas and mineral rights beneath that same land.
The company (then named Consolidation Services, Inc.) signed an option, effective March 31, 2008, giving it until October 1, 2008 to close a purchase of the oil, gas and mineral rights on Buckhorn Resources LLC's property from Eastern Kentucky Land Corporation, which keeps a $0.30-per-ton coal right. The price is $200,000 cash plus 415,584 unregistered shares valued at $1.925 each ($800,000); the company pays $20,000 by April 8, 2008 and $5,000 monthly, credited against the cash, and guarantees the $800,000 share value if sales follow the lock-up (weekly sales up to 7,992 shares from April 1, 2009).
