SILVER STAR ENERGY INC (SVSE) company history: the story so far

History

Silver Star Energy signed small-cap exploration deals and raised convertible debt, defaulted on its notes, and by June 2007 was selling its North Franklin interest to settle with lenders.

2003-2004: Deals without the money

The company, then called Movito Holdings, began in October 2003 by agreeing with 1048136 Alberta Ltd., owned by Scott Marshall, to earn a 66.67% working interest in two Alberta prospects, Evi and Verdigris. Earning them meant advancing $2,000,000 and $1,500,000 in instalments during 2004. The filing said the company lacked the funds, and that it would earn nothing if it missed a payment.

Renamed Silver Star Energy, it signed two December 2003 agreements with Archer Exploration to earn interests in North Franklin and Winter Pinchout in California's Sacramento Basin, again saying it lacked the funds on hand. Two directors resigned that month. The record does not say what became of the Alberta prospects.

In November 2004 it signed an equity line letting it sell up to $10,000,000 of stock to Cornell Capital Partners once a registration statement was effective. It paid a $350,000 commitment fee in shares and received a $750,000 convertible debenture. An amended filing a day later made the terms more dilutive for shareholders.

2005-2006: Kansas, notes and a sale

In August 2005 the company took a 20% interest in airborne magnetic survey data over about 1,000,000 acres in Kansas, with a two-well drilling program to be funded in proportion to each party's share. The counterparty was again 1048136 Alberta.

On October 14, 2005 it closed $3,350,000 of senior secured convertible notes, convertible at $0.315 per share, with five-year warrants at $0.63. It also sold its Joarcam assets in Alberta to EnerMark Inc., closing December 6, 2005. Its share was about CAD$2,227,750, and the pro forma 2005 net income was $856,416, including a $1,001,695 disposal gain.

2007: Default and settlement

The notes went into default. Three lenders holding $950,000 sued in US Bankruptcy Court, and a settlement all lenders accepted was reached on May 7, 2007. The company would sell its 40% North Franklin interest for $3,100,000 and repay $2,470,000 of the roughly $3,429,885 owed. The remainder became convertible at a deemed $0.04, and 12,500,000 warrants were re-priced to $0.04, so dilution is likely to be large. No resale registration statement will be filed.

As of June 8, 2007, the sale had not been confirmed as completed. The company also agreed to lend MB Gas Inc., a private Alberta company, $500,000 to $1 million for 12.5% of its revenue until payout. Going-concern doubt remained among the open threads.

Written from the 8 story beats below (2003 to 8 June 2007), 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.

2007

8 June
The company is in default on the October 2005 convertible notes. Three lenders holding $950,000 of the $3,430,000 raised filed a claim in US Bankruptcy Court (Central District of California), and a settlement all lenders accepted was reached. It sells the company's 40% North Franklin gas field interest for $3,100,000 and repays $2,470,000 of the roughly $3,429,885 owed. The rest becomes convertible into shares at a deemed $0.04, and 12,500,000 warrants are re-priced to $0.04, so dilution is likely to be large versus the earlier $0.315 conversion price. No resale registration statement will be filed, which resolves that open thread. The company also agrees to lend MB Gas Inc. (private, Alberta) $500,000 to $1 million for 12.5% of MB's revenue until payout, then 5% to 10%.
bankruptcy or receivership

2006

6 Feb
The company and three other sellers agreed on October 6, 2005 to sell their Joarcam-area (Alberta) petroleum and natural gas assets to EnerMark Inc. for CAD$4,208,000 cash; the sale closed December 6, 2005. The company's share was 66.5% of the first CAD$3,350,000, about CAD$2,227,750, and none of the remaining CAD$858,000. Director William Scott Marshall is president of seller Blue Scorpion. The filing also includes pro forma results without Joarcam, showing a 12-month 2005 net income of $856,416 including a $1,001,695 gain on disposal.
asset acquisition disposition

2005

19 Oct
On October 14, 2005 the company closed $3,350,000 of senior secured convertible promissory notes, with an option for holders to buy up to $3,350,000 more. The notes pay 8% dividends (in cash or shares at the company's option) and convert at a fixed $0.315 per share, and investors also get five-year warrants at $0.63 per share. The company expects to use net proceeds for drilling costs and general working capital, which may help fund its share of the Kansas drilling program (an inference). Conversion and warrants could dilute existing shareholders.
capital raising announcement
4 Oct
Around August 10, 2005 the company signed a Data Sharing Agreement with 1048136 Alberta Ltd., Cascade Energy and Fidelis Energy, giving it a 20% interest (Cascade and Fidelis 25% each) in airborne magnetic survey data over about 1,000,000 acres in Kansas. The parties agreed to pay for acquiring up to two sections of land picked by Alberta and to fund a two-well drilling program in proportion to their shares, with Alberta as operator and no interest earned in the data until drilling. 1048136 Alberta Ltd. is the same counterparty as in the October 2003 Evi and Verdigris deals.
material agreement

2004

10 Dec
An amended version of the November 2004 Cornell Capital financing report. It lowers the price Cornell pays under the $10,000,000 equity line from 100% to 98% of the lowest volume weighted average price, and changes the debenture conversion price to the lesser of 120% of the closing bid price as of the date of the agreement or 80% of the lowest closing bid over the five days before conversion. This is more dilutive for shareholders than the original description. The exhibit list now names Silver Star Energy instead of Sonoran Energy.
capital raising announcement
9 Dec
On November 24, 2004 the company signed a Standby Equity Distribution Agreement letting it sell up to $10,000,000 of stock to Cornell Capital Partners at its discretion, but only after a registration statement is declared effective. It paid Cornell a $350,000 commitment fee in shares and received a $750,000 convertible debenture (5% interest, three years), with a second $750,000 tranche due on filing a registration statement. Shareholders face dilution if shares are sold or the debenture converts at a price tied to the market. The exhibit list names 'Sonoran Energy, Inc.' rather than Silver Star, which looks like a drafting error (an inference), and the next filing corrects it.
capital raising announcement

2003

23 Dec
Now named Silver Star Energy and based in Los Angeles, the company signed two December 5, 2003 agreements with Archer Exploration, Inc. to earn interests in the North Franklin prospect and the Winter Pinchout project in California's Sacramento Basin. It would pay Archer $85,000 and $100,000 on signing respectively, plus further payments tied to drilling, and can earn 100% of each if it completes its funding; the filing says it lacks the funds on hand to meet these obligations. Directors Jamie Cirotto and Carmelo Mamertino resigned effective December 17, 2003; this follows the October 2003 Alberta prospect agreements, though this filing does not say what became of those.
asset acquisition disposition
13 Nov
Under two agreements dated October 29, 2003 with 1048136 Alberta Ltd. (owned by Scott Marshall), the company (then named Movito Holdings Ltd.) gained the right to earn a 66.67% working interest in the Evi prospect (by advancing $2,000,000 in four $500,000 payments, Feb 1 to May 1, 2004) and in the Verdigris prospect (by advancing $1,500,000 in three $500,000 payments, Feb 1 to Apr 1, 2004), both in Alberta. The filing says the company does not currently have the funds to meet these obligations, and it earns nothing if it misses a payment.
asset acquisition disposition