History
A shell-like company pivoted into oil and gas, funded its Louisiana and Alberta bets with ever-cheaper convertible debt, and ended in a lawsuit and a near-15-billion-share issuance.
2006: From tanning shell to explorer
The company first appeared in the record as Universal Tanning Ventures, Inc. In May 2006 it agreed that Rhino Island Capital, Ltd., a British Virgin Islands company, could buy up to 35,000,000 restricted shares in a private offering. It issued 2,000,000 shares in anticipation, but further issuance was capped until shareholders raised the authorized limit, then 10,000,000 shares. The deal's status was never resolved in the record.
By August the company was filing as Universal Energy Corp. It issued 10,000,000 shares into escrow under a purchase agreement with an individual investor, at a stated price of $0.25 a share. In September it signed an option and farmout agreement letting it earn a 95% working interest in lands in Alberta's Pembina Nisku fairway, subject to a 5% net carried interest and a 15% convertible gross overriding royalty. This was its first oil and gas asset.
2007: Louisiana prospects and secured debt
In 2007 the company, through its subsidiary Universal Explorations Corp., took stakes in three prospects operated by Yuma Exploration and Production Company in Louisiana. It bought 10% of Caviar before casing point (7.5% after) in March, then in May an 18.75% interest in Lake Campo and 7.5% of Amberjack before casing point (5.625% after).
Paying for this meant debt. In September it sold $5,000,000 of 8% secured convertible debentures, receiving $4,000,000 after a 20% discount. They were due August 2009, convertible at $0.80, and secured by a lien on all assets, with warrants attached. In November it sold a further $1,742,647 of debentures for $1,350,000. Shares outstanding stayed near 29.6 to 29.7 million. Also in late 2007 the auditor changed; the earlier auditor's reports for 2005 and 2006 had expressed substantial doubt about the company's ability to continue as a going concern.
2008: Repricing and cheaper money
In June 2008 the company closed a third round: $2,000,000 of unsecured debentures raising $770,000. These converted at the lower of $0.25 or 80% of recent low bids, so a falling share price meant more shares. To close it, holders of the 2007 debentures accepted the same formula, a sharp cut from $0.80. Shares outstanding were 29,897,678 at May 29, 2008. A fourth round closed in November, raising $605,000 on a face value described in the filing as $777,0000, an evident typo, again on the same terms.
2009-2010: Lawsuit, mass issuance and exit
On September 1, 2009 the 2007 secured debenture holders, Roswell Capital Partners and Bridgepointe Master Fund, sued the company in New York federal court. They alleged breaches, sought damages, a ruling on their lien, foreclosure and a receiver. They cited missed 2009 redemption payments and too few reserved shares. The company said it had hit its authorized share limit in February 2009, and shareholders approved an increase on September 23.
On September 30 it paid $1,644,692.77 of principal and $144,437.37 of interest using 14,909,417,833 shares, leaving $215,962.64 owed to Bridgepointe. It also converted all its remaining debt into shares that day. The issuance, against roughly 29.9 million shares in mid-2008, heavily diluted existing holders, and total shares outstanding afterward were not stated. A response to the lawsuit was due October 12, 2009.
In May 2010 the company deregistered its securities, ending its obligation to file reports with the SEC. The record shows no drilling results from the Yuma prospects or the Alberta earn-in.
Written from the 14 story beats below (2006 to 5 May 2010), which come from the company's own announcements and filings.