Post by mullahpaloozer on Aug 19, 2015 9:51:19 GMT -4
repost from PB29 ... thanks
portrush
Global Moderator
*****
Webinar Notes
August 18, 2015
Re: CMKM/NHHI Regulation D Offering
Not sure if there will be another webinar this month. Depends on the outcome tonight…if there are others not clear on tonight’s discussion.
Update on litigation:
July 15th, did get thousands of pages of information from WF and is currently researching hoping to find assets the company can reclaim. They have more information coming soon on where money went, where it was laundered or other assets the company can seize. We have over $35 million in judgments to recover. It takes time to get through it all.
The hearing in the criminal trial today…between the DOJ, Federal court and attorneys for the defendants. At the moment nothing has changed for the trial on 9/15 but there is a strong effort by the defendants to get the case delayed again. He feels there will be enough push to get it delayed a while longer due to their claim they’re not ready for trial because there are hundreds of thousands of pages of material recently made available to defendants. Typically the courts move in 3-6 month time frames…so he anticipates it will be moved later. He is disappointed in that—but has nothing confirming that at the moment.
Finally, the judgment debtor in the case of Nicole Durr, the court upheld our judgment—and the defendant filed an appeal. This is not unusual and no totally unexpected. From there he is not sure how long it will take for this to be processed. IN some cases the court will require mediation of an appeal—in other cases the court may wait to see what the defendants reason for a delay is. There is no stay on our judgment and there is nothing preventing us from collecting other than some of the assets identified are out of the country. There are some things in motion in this case that lead him to think it might not take long on this case.
As a result of this appeal and the delays in collecting significant cash, it brings up the need to bring up alternative methods of raising capital. Hence the webinar tonight.
The Amazon link has generated $30+ month to date.
Regulation D private placement
SK will be doing some surveying of shareholders during this webinar tonight before the Q&A session. There is a lot to talk about tonight.
There’s several things we need to talk about in detail tonight.
Typically a company owner brings its own cash into developing a company. IN the case of this one, there was criminal activity that resulted in $200 million worth of stock sold in this company, which unfortunately that money was diverted into other pockets rather than building the business for the benefit of the shareholders.
We’re not in the position to sell stock on the open market—the company is delisted.
We’re not in the position for the company to get a loan. It is essentially a dead start-up. All the old is gone, there is nothing left to speak off. No significant assets other than judgments which aren’t worth anything until collected. There is the debts to be carried forward on the books that would be worth something to a company that reversed merge—but we’re not in the position to do much.
We have zero credit and no commercial D&B rating. We have very little income. This is not a company that would get any banker excited to give a loan. Remember we nearly defaulted on the Clayton, GA property before it was sold and the company netted a small amount.
Our options:
1. Sit and wait on the slow court process on the judgments.
2. We can go to the private equity markets outside of the shareholder base and bring in some private money to fund an O&G business. But due to the negative comments on the web—getting someone to invest would be bear impossible. So we would need to form another company (other than NHHI) in order to have that company get funding and make that company a partner of sorts with NHHI.
Due to the rapid reduction of oil prices, it has created both challenges and opportunities. Unsophisticated investors won’t invest in O&G because they reluctant to do anything given the negativity in the news about oil pricing. He was waiting for the bottom…before talking about it again.
It appears to him that he should present the opportunity to our shareholders before going out to the private equity world to see if we can raise the money to move forward.
Many in the oil business are in a world of hurt because of the shop drop in pricing…and it has become a shocker to the whole oil world. From everything he can see and the deals he’s found on a regular basis—now is the time to get into this game if you’re going to get in. Many are over-extended and once the price went down they’re in need to finding new revenue to cure their problems. There are deals that can be picked up now that are neglected, about to be clawed back by a bank, etc. The opportunities are great.
People that are capitalized and know what they’re doing tend to load up on companies during a time like this. SK has been researching and meeting with people for over two years now. There is opportunity to find large, big deals out there right now. Medium and small deals are bring grabbed up as well—but there is always a deal out there (if you can move fast enough) that can be purchased for peanuts when compared to a year ago. It’s a good time to buy. This is what he sees. He has a lot of contacts in the oil industry. It’s an exciting business and he is confident now is a good time to buy. Everything O&G related is cheaper right now—from leases to labor, equipment to the wells themselves.
The fact that we’ve been delayed in the collection of this large judgment has created the need to move forward with something else for funding.
If we’re willing to offer our shareholders a deal sponsored by NHHI…the SEC has sanctioned some opportunities for small companies. Regulation D offering is something that is low-cost but an effective way for raising funds without the expense of going public. NHHI doesn’t have the ability or track reecord to do a Reg D offering.
A rule 504, allows the company can issue to as many non-accredited investors as you would like, but the company is limited to raising only $1million per calendar year and the issuer is not subject to specific disclosure requirements. If the shareholders don’t want to do this—the company won’t do it. He doesn’t want to roll out something that asks you to put out more money…he wants a sense of shareholder thinking first.
There’s a 505, but he’s citing 506. The 506 allows an unlimited amount of money may be raised in offerings relying on one of two possible Rule 506 exemptions. Similar to Rule 505, an issuer relying on Rule 506(b) may sell to an unlimited number of accredited investors, but to no more than 35 non-accredited investors. However, unlike Rule 505, the non-accredited investors in the offering must be financially sophisticated or, in other words, have sufficient knowledge and experience in financial and business matters to evaluate the investment. As with a Rule 505 offering, if non-accredited investors are involved, the issuer must disclose certain information about itself, including its financial statements.
If we take this outside our shareholder base and he rolls it out to a private equity base, he would do so as a 506C—with all the investors being accredited. This allows him to market it via any means of marketing. Certainly he can offer a 504 to the shareholder base exclusively to only our shareholders. He would prefer to do this as a 504 and he’s not looking to raise anywhere near $1million.
Then only onus on the company is that they must be truthful to those willing to invest. So let’s assume… for sake of discussion, if enough are interested he would do a 504. He could set the unit size at any price he chooses—not a dollar per unit, but perhaps ten. He would want to keep it low enough that anyone who wants to participate can do so.
This is the hard fact—Steve didn’t buy a shell (CMKM). The company isn’t his—it’s the shareholder’s company. This is YOUR company. All he is trying to do is turn this company into something of value for the shareholder’s benefit. If you don’t want to do a 504 and invest more—no one will twist your arm. The decision will be made by a group of people contacting him saying they want to do it. If there is enough people, and enough money to move forward with a 504 he will do it. If not, then the company will wait on the next judgment to be released.
He’s tired of waiting on the legal hassles we’ve been dealing with and he knows shareholders are as well.
If the company can raise $50,000 minimum, it would be enough to move forward with a 504 structured under NHHI. There would be no dilution because it would be done under NHHI.
Right now you have nothing. The reason your value is at zero is due to the criminal enterprise that happened years ago. He says, he guarantees that UC felt that KW would be so overwhelmed by 2007 that he would BK and the company and walk away—but that didn’t happen.
Should he later decide to go to the private investor market because there aren’t enough shareholders wanting to do a 504…or the wait is too long…and he then decides to offer a 506C, then it wouldn’t further dilute your current holdings. It would strictly be with accredited investors but will be with a new company (LLC) and he will give NHHI a free stake in that new company. There will be no dilution.
We have 100 Billion shares in the Treasury. We could legally raise money by giving them shares in the company if they invest in addition to your equity stake in this new deal. He would prefer not to do that—and just do a 504 with shareholders only.
Let’s assume we do a 504. There are two options:
1) An equity structure: He would offer our shareholders a 50% equity stake would be given to NHHI investors and they would have to hold it for 3-5 years. Another 50% would go to NHHI who would then give 25% stake would have to be given to the oil field operator. Ultimately if we’re successful…then the company becomes the operator and we could eliminate the need to hire one. But that’s a long way away.
On an equity structure—and we get in for $50K—with the structure he has in mind on a conservative proforma—that investment over 36 months would return $64K+. He can buy an oil field right now for $10K with 9 wells on it. They shut the power off on all of them because they aren’t making money on them below $100 a barrel. There some issues that would have to be addressed…but he could have the power turned back on, have some enhancements made to improve production and it would work. This is located in TX on 240 acres in a very famous part of TX. We could be pumping 2.5 barrels a day.
If we get production up to 5 barrels a day, having spent $50K, the investors would get back $21K collectively (at $40 BBL) in the first year. 5 barrels at day at $60 BBL would provide shareholders $30K collectively a year.
He wants to be sure that anyone who invests would get more than their investment back—and eventually ownership would return to NHHI.
2) Under a Debt Structure: Investors would loan NHHI the money. NHHI would own 100% of the asset, but have to give 25% to the operator…and would be making interest payments to the shareholders. The interest on a 50K loan over three years would be $58K. This produces a monthly payment to the investors. The shareholders would be made whole and the company would have its wells. This is the better approach for the company. If the company defaulted, these investors would then own the oil field.
He’s actual made an offer on this field he’s discussing of $10K and they accepted it. There is a need to pull out a plug in the salt water well—which he might spend his own money on to see if it works, before making the purchase.
He doesn’t know which one of these to target because he doesn’t know if there is enough interest in the shareholder base. If he knew he could raise $50K at 10% interest or more—he might scale up and buy a bigger asset that produces better or more.
He is discussing yet another deal that offers wells for $41K that produces 6 barrels a day. It is too much info delivered too quickly to capture in these notes.
Risk and Reward:
Do not ever consider investing unless you can afford to lose the money. No one is going to twist your arm. This is an option that is a theoretical thing that might get your company (NHHI) moving quicker than waiting on legal work.
He suggest this is a safer investment offer than one might find in the market unless you’re a sophisticated investor.
One other option to offer investors as a safety valve…if you got nervous during this time, and if we got paid by one of the judgments, perhaps we can buy you out early. This assumes we get enough money from recovery.
The only deals he would consider are very conservative deals. No wildcatting. These are established wells that have been producing for a long time. Some deals he has seen can be profitable down to $20 a barrel. Most of the cheap deals he’s seen have a lift cost of $15 a barrel.
Mid-Term Benefits:
If this could be pulled off and build some sort of revenue somehow…this would create the ability to attract future investments. This would build cash reserves to deals in house over time. This would create some credit-worthiness to borrow funds for expansion and can produce some ROI for the investors. We can prove to the SEC that we’re able to trade again. We become viable for a merger possibility with a larger company and or buy other companies to grow the company. We could lose our money—but you’ve lost a lot already.
Long range goals:
To be a mid-range oil company. Wants to keep it a size that it can be maneuvered easily—fully integrated with exploration, production and oil company services. Ultimately he would like to become a company that can drill their own wells. Looking at a lot of emerging technology for enhanced recovery—they’re all looking to raise money—and perhaps we can help fund some of that. The final stage would be get into refining.
This is your decision—and you make that by letting him know if you want to invest money in this. If the shareholders don’t want to do it—then he will wait on legal recovery until and if he gets tired and then will pursue the 506C option. The company will eventually be able to do this without shareholder investment—but this is a good time to buy.
If you don’t want to invest or willing to take the risk—don’t get in on this.
Q&A:
Q: What might get more interest is if we can get more transparency as to who the partners are. Being burned as a CMKX shareholders like others, I’m worried about being burned again because there’s not enough cash on hand. Please address transparency and how much cash to be put aside to keep investment less risky and more safe.
A: I’m no sure you understand the concept of an operator. SK will not be an operator. They are friends of his—and he trusts them. So understand that the 25% carried interest that the operator gets is the cheapest deal we would get. These guys have real experience and have worked on oil fields for a very long time. These are just honorable people motivated to help and they see this is an entity that grows into something significant. These operators can be terminated if they’re not doing a good job. We’re not to the point where I can be more transparent than I am tonight. This is all theoretical tonight. But if/when we get a deal, you can come to TX and actually see the field for yourself.
Q: I think the equity position is a great idea. I assume the appeals on the judgment, there is some obvious collectability there because they’re fighting so much. If you’re looking to raise $50K and I give you $1000, I assume the payout would be 1/50th of the proceeds. When would they take place?
A: Yes there is collectability or we wouldn’t have gone as far as we have. I’ve been on the phone lately and rounded up some additional fire power and looking at some options—from other attorneys to some willing to buy our judgment. He is going to test them to see how good they do. Anyway, in the past he’s had a serious offer to buy all the judgments…and talked it through extensively, but in the 11th hour they proved not to be bale to put up the money they said they could. If we’re successful in collecting before the investment deal comes forward…we will scrap the investment deal and fund it with the company. As to the equity position—yes you would be getting a check for your position. Ultimately he would like to do so on a monthly basis to equity investors after about a 90-day waiting period.
Q: Regarding the property with 9 wells—how many are ready to produce oil right now? How about other wells in the area? What do you look for when considering these wells.
A: The current owner of these two leases he can pick up for $10K…aren’t really oil guys. They’ve owned them for 10 years and haven’t invested in maintaining the wells. IF they had the money to fix something they would, if not they would just let it go. There is room to drill some more wells. This is located on the Wagner Ranch. Look it up—it’s the largest ranch in America behind one fence. Its is currently for sale for $725 million and he actually has some friends looking at buying it. There are billions of barrels of oil under the Wagner ranch. The family owns 150 wells and the rest are on leases that were leased to companies that wanted to drill. These are older wells or we wouldn’t be getting them for $10K. But the potential is very good. We would have to turn the power back on, fix the salt water well, make few fixes and see what we can get out of the wells. Etc, etc.
As to what do I look for…if I knew how much money we had to work with. If I had $800K he could buy some serious production right now. This could produce up to 50-60 wells producing a day. What he’s looking for is the best bang for the buck…how much production for the money. In the case of the Wagner ranch leases, he has enough production information to be able to see that they’re paying taxes on the production, so they’re producing. He’s looking at deals from large to small—from 20,000 barrels a month to some small ones too. SK has been in TX for over a year and looking at deals constantly.
Q: Who files the forms with the SEC when you’re operating oil wells?
A: We’re doing a Reg D offering online through Edgar, so there are not SEC filings.
What follows are my questions which came, for the most part direct from the SEC website that raises red flag questions potential investors in private placements should make themselves aware of.
Q: Do you intend to release a private placement memorandum and the company’s financial statements before offering this? How soon?
A: He cannot provide the financials beyond the tax returns. The 504 doesn’t require financial statements. He will provide a rough/boilerplate private placement memorandum as soon as he can ascertain the direction shareholders want to proceed and how much money he has to work with.
Q: Do you intend this offering to be a restricted security? If so, did I hear correctly your expectation is shareholders will hold this new investment for 3-5 years minimum before there’s a plan to hold a registered offering allowing them to sell?
A: SK said, No, you didn’t hear correctly. SK said as a 504 this is not a registered.
NOTE: But according to the SEC website, this does appear to be confusing. Read it for yourself.
www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-private-placements-under-regulation-d
Q: Will you agree to a registered offering stipulation up-front?
A: He’s not sure.
Q: Which State would this offering be filed with—Alabama or Texas?
A: This will be a TX offering.
Q: Can you provide written assurance that this will comply with state securities laws, including state registration requirements or a state exemption from registration?
A: Yes, it will be in compliance with TX laws.
Q: Will this offering be common or preferred stock, limited partnerships interests, a membership interest in a limited liability company, or an investment product such as a note or bond?
A: This will be a 504 offering as described earlier.
Q: When do you look to offer this?
A: As soon as this can be figured out…interest level from shareholders and the amount of money required. If you’re interested in investing—email him at the company address. stevek@cmkmdiamonds.com
Q: What benefit is 50K shareholders from CMKM being a drag on this new venture of NHHI? What benefit is there to not BK CMKM and just run with NHHI as a new investment?
Q: Wouldn’t those “worthless” CMKM shares be worth more to the shareholder as a bona fide tax deduction rather than baggage for NHHI and moving forward?
Note: He blew apart at these two questions. He totally misunderstood them. I didn’t get answers until we spoke privately after the webinar was over. He admitted he did misunderstand them—thought they were gotcha questions, when my intent was sincere. He said he wasn't prepared for them. But he is the one that called shareholders shares in CMKX worthless. He is the one who said that the O&G business would be starting from scratch. Based on those comments early on, I thought these questions were fair to ask.
Why carry forward something that has died (according to him) into something that is a start-over from ground zero. Suffice to say his calmer better thought-out response over the phone was expressed in his concerns not to dump shareholders without the ability to bring value to their holdings through the effort of growing this new venture—should there be enough shareholder interest. Noble.
Apparently my line of questioning was too soon for him as his intention for the webcast was to offer a simply exploratory question into the viability of shareholder interest in further investing in NHHI.
I’m sure I missed some of the other things said during Q&A, several question were repetitive of what he covered regarding the equity and debt positions…or how fast they would see a return on their additional investment.
Perhaps someone else will have spent the three hours it took to listen and record some notes you can refer to.
pr
portrush
Global Moderator
*****
Webinar Notes
August 18, 2015
Re: CMKM/NHHI Regulation D Offering
Not sure if there will be another webinar this month. Depends on the outcome tonight…if there are others not clear on tonight’s discussion.
Update on litigation:
July 15th, did get thousands of pages of information from WF and is currently researching hoping to find assets the company can reclaim. They have more information coming soon on where money went, where it was laundered or other assets the company can seize. We have over $35 million in judgments to recover. It takes time to get through it all.
The hearing in the criminal trial today…between the DOJ, Federal court and attorneys for the defendants. At the moment nothing has changed for the trial on 9/15 but there is a strong effort by the defendants to get the case delayed again. He feels there will be enough push to get it delayed a while longer due to their claim they’re not ready for trial because there are hundreds of thousands of pages of material recently made available to defendants. Typically the courts move in 3-6 month time frames…so he anticipates it will be moved later. He is disappointed in that—but has nothing confirming that at the moment.
Finally, the judgment debtor in the case of Nicole Durr, the court upheld our judgment—and the defendant filed an appeal. This is not unusual and no totally unexpected. From there he is not sure how long it will take for this to be processed. IN some cases the court will require mediation of an appeal—in other cases the court may wait to see what the defendants reason for a delay is. There is no stay on our judgment and there is nothing preventing us from collecting other than some of the assets identified are out of the country. There are some things in motion in this case that lead him to think it might not take long on this case.
As a result of this appeal and the delays in collecting significant cash, it brings up the need to bring up alternative methods of raising capital. Hence the webinar tonight.
The Amazon link has generated $30+ month to date.
Regulation D private placement
SK will be doing some surveying of shareholders during this webinar tonight before the Q&A session. There is a lot to talk about tonight.
There’s several things we need to talk about in detail tonight.
Typically a company owner brings its own cash into developing a company. IN the case of this one, there was criminal activity that resulted in $200 million worth of stock sold in this company, which unfortunately that money was diverted into other pockets rather than building the business for the benefit of the shareholders.
We’re not in the position to sell stock on the open market—the company is delisted.
We’re not in the position for the company to get a loan. It is essentially a dead start-up. All the old is gone, there is nothing left to speak off. No significant assets other than judgments which aren’t worth anything until collected. There is the debts to be carried forward on the books that would be worth something to a company that reversed merge—but we’re not in the position to do much.
We have zero credit and no commercial D&B rating. We have very little income. This is not a company that would get any banker excited to give a loan. Remember we nearly defaulted on the Clayton, GA property before it was sold and the company netted a small amount.
Our options:
1. Sit and wait on the slow court process on the judgments.
2. We can go to the private equity markets outside of the shareholder base and bring in some private money to fund an O&G business. But due to the negative comments on the web—getting someone to invest would be bear impossible. So we would need to form another company (other than NHHI) in order to have that company get funding and make that company a partner of sorts with NHHI.
Due to the rapid reduction of oil prices, it has created both challenges and opportunities. Unsophisticated investors won’t invest in O&G because they reluctant to do anything given the negativity in the news about oil pricing. He was waiting for the bottom…before talking about it again.
It appears to him that he should present the opportunity to our shareholders before going out to the private equity world to see if we can raise the money to move forward.
Many in the oil business are in a world of hurt because of the shop drop in pricing…and it has become a shocker to the whole oil world. From everything he can see and the deals he’s found on a regular basis—now is the time to get into this game if you’re going to get in. Many are over-extended and once the price went down they’re in need to finding new revenue to cure their problems. There are deals that can be picked up now that are neglected, about to be clawed back by a bank, etc. The opportunities are great.
People that are capitalized and know what they’re doing tend to load up on companies during a time like this. SK has been researching and meeting with people for over two years now. There is opportunity to find large, big deals out there right now. Medium and small deals are bring grabbed up as well—but there is always a deal out there (if you can move fast enough) that can be purchased for peanuts when compared to a year ago. It’s a good time to buy. This is what he sees. He has a lot of contacts in the oil industry. It’s an exciting business and he is confident now is a good time to buy. Everything O&G related is cheaper right now—from leases to labor, equipment to the wells themselves.
The fact that we’ve been delayed in the collection of this large judgment has created the need to move forward with something else for funding.
If we’re willing to offer our shareholders a deal sponsored by NHHI…the SEC has sanctioned some opportunities for small companies. Regulation D offering is something that is low-cost but an effective way for raising funds without the expense of going public. NHHI doesn’t have the ability or track reecord to do a Reg D offering.
A rule 504, allows the company can issue to as many non-accredited investors as you would like, but the company is limited to raising only $1million per calendar year and the issuer is not subject to specific disclosure requirements. If the shareholders don’t want to do this—the company won’t do it. He doesn’t want to roll out something that asks you to put out more money…he wants a sense of shareholder thinking first.
There’s a 505, but he’s citing 506. The 506 allows an unlimited amount of money may be raised in offerings relying on one of two possible Rule 506 exemptions. Similar to Rule 505, an issuer relying on Rule 506(b) may sell to an unlimited number of accredited investors, but to no more than 35 non-accredited investors. However, unlike Rule 505, the non-accredited investors in the offering must be financially sophisticated or, in other words, have sufficient knowledge and experience in financial and business matters to evaluate the investment. As with a Rule 505 offering, if non-accredited investors are involved, the issuer must disclose certain information about itself, including its financial statements.
If we take this outside our shareholder base and he rolls it out to a private equity base, he would do so as a 506C—with all the investors being accredited. This allows him to market it via any means of marketing. Certainly he can offer a 504 to the shareholder base exclusively to only our shareholders. He would prefer to do this as a 504 and he’s not looking to raise anywhere near $1million.
Then only onus on the company is that they must be truthful to those willing to invest. So let’s assume… for sake of discussion, if enough are interested he would do a 504. He could set the unit size at any price he chooses—not a dollar per unit, but perhaps ten. He would want to keep it low enough that anyone who wants to participate can do so.
This is the hard fact—Steve didn’t buy a shell (CMKM). The company isn’t his—it’s the shareholder’s company. This is YOUR company. All he is trying to do is turn this company into something of value for the shareholder’s benefit. If you don’t want to do a 504 and invest more—no one will twist your arm. The decision will be made by a group of people contacting him saying they want to do it. If there is enough people, and enough money to move forward with a 504 he will do it. If not, then the company will wait on the next judgment to be released.
He’s tired of waiting on the legal hassles we’ve been dealing with and he knows shareholders are as well.
If the company can raise $50,000 minimum, it would be enough to move forward with a 504 structured under NHHI. There would be no dilution because it would be done under NHHI.
Right now you have nothing. The reason your value is at zero is due to the criminal enterprise that happened years ago. He says, he guarantees that UC felt that KW would be so overwhelmed by 2007 that he would BK and the company and walk away—but that didn’t happen.
Should he later decide to go to the private investor market because there aren’t enough shareholders wanting to do a 504…or the wait is too long…and he then decides to offer a 506C, then it wouldn’t further dilute your current holdings. It would strictly be with accredited investors but will be with a new company (LLC) and he will give NHHI a free stake in that new company. There will be no dilution.
We have 100 Billion shares in the Treasury. We could legally raise money by giving them shares in the company if they invest in addition to your equity stake in this new deal. He would prefer not to do that—and just do a 504 with shareholders only.
Let’s assume we do a 504. There are two options:
1) An equity structure: He would offer our shareholders a 50% equity stake would be given to NHHI investors and they would have to hold it for 3-5 years. Another 50% would go to NHHI who would then give 25% stake would have to be given to the oil field operator. Ultimately if we’re successful…then the company becomes the operator and we could eliminate the need to hire one. But that’s a long way away.
On an equity structure—and we get in for $50K—with the structure he has in mind on a conservative proforma—that investment over 36 months would return $64K+. He can buy an oil field right now for $10K with 9 wells on it. They shut the power off on all of them because they aren’t making money on them below $100 a barrel. There some issues that would have to be addressed…but he could have the power turned back on, have some enhancements made to improve production and it would work. This is located in TX on 240 acres in a very famous part of TX. We could be pumping 2.5 barrels a day.
If we get production up to 5 barrels a day, having spent $50K, the investors would get back $21K collectively (at $40 BBL) in the first year. 5 barrels at day at $60 BBL would provide shareholders $30K collectively a year.
He wants to be sure that anyone who invests would get more than their investment back—and eventually ownership would return to NHHI.
2) Under a Debt Structure: Investors would loan NHHI the money. NHHI would own 100% of the asset, but have to give 25% to the operator…and would be making interest payments to the shareholders. The interest on a 50K loan over three years would be $58K. This produces a monthly payment to the investors. The shareholders would be made whole and the company would have its wells. This is the better approach for the company. If the company defaulted, these investors would then own the oil field.
He’s actual made an offer on this field he’s discussing of $10K and they accepted it. There is a need to pull out a plug in the salt water well—which he might spend his own money on to see if it works, before making the purchase.
He doesn’t know which one of these to target because he doesn’t know if there is enough interest in the shareholder base. If he knew he could raise $50K at 10% interest or more—he might scale up and buy a bigger asset that produces better or more.
He is discussing yet another deal that offers wells for $41K that produces 6 barrels a day. It is too much info delivered too quickly to capture in these notes.
Risk and Reward:
Do not ever consider investing unless you can afford to lose the money. No one is going to twist your arm. This is an option that is a theoretical thing that might get your company (NHHI) moving quicker than waiting on legal work.
He suggest this is a safer investment offer than one might find in the market unless you’re a sophisticated investor.
One other option to offer investors as a safety valve…if you got nervous during this time, and if we got paid by one of the judgments, perhaps we can buy you out early. This assumes we get enough money from recovery.
The only deals he would consider are very conservative deals. No wildcatting. These are established wells that have been producing for a long time. Some deals he has seen can be profitable down to $20 a barrel. Most of the cheap deals he’s seen have a lift cost of $15 a barrel.
Mid-Term Benefits:
If this could be pulled off and build some sort of revenue somehow…this would create the ability to attract future investments. This would build cash reserves to deals in house over time. This would create some credit-worthiness to borrow funds for expansion and can produce some ROI for the investors. We can prove to the SEC that we’re able to trade again. We become viable for a merger possibility with a larger company and or buy other companies to grow the company. We could lose our money—but you’ve lost a lot already.
Long range goals:
To be a mid-range oil company. Wants to keep it a size that it can be maneuvered easily—fully integrated with exploration, production and oil company services. Ultimately he would like to become a company that can drill their own wells. Looking at a lot of emerging technology for enhanced recovery—they’re all looking to raise money—and perhaps we can help fund some of that. The final stage would be get into refining.
This is your decision—and you make that by letting him know if you want to invest money in this. If the shareholders don’t want to do it—then he will wait on legal recovery until and if he gets tired and then will pursue the 506C option. The company will eventually be able to do this without shareholder investment—but this is a good time to buy.
If you don’t want to invest or willing to take the risk—don’t get in on this.
Q&A:
Q: What might get more interest is if we can get more transparency as to who the partners are. Being burned as a CMKX shareholders like others, I’m worried about being burned again because there’s not enough cash on hand. Please address transparency and how much cash to be put aside to keep investment less risky and more safe.
A: I’m no sure you understand the concept of an operator. SK will not be an operator. They are friends of his—and he trusts them. So understand that the 25% carried interest that the operator gets is the cheapest deal we would get. These guys have real experience and have worked on oil fields for a very long time. These are just honorable people motivated to help and they see this is an entity that grows into something significant. These operators can be terminated if they’re not doing a good job. We’re not to the point where I can be more transparent than I am tonight. This is all theoretical tonight. But if/when we get a deal, you can come to TX and actually see the field for yourself.
Q: I think the equity position is a great idea. I assume the appeals on the judgment, there is some obvious collectability there because they’re fighting so much. If you’re looking to raise $50K and I give you $1000, I assume the payout would be 1/50th of the proceeds. When would they take place?
A: Yes there is collectability or we wouldn’t have gone as far as we have. I’ve been on the phone lately and rounded up some additional fire power and looking at some options—from other attorneys to some willing to buy our judgment. He is going to test them to see how good they do. Anyway, in the past he’s had a serious offer to buy all the judgments…and talked it through extensively, but in the 11th hour they proved not to be bale to put up the money they said they could. If we’re successful in collecting before the investment deal comes forward…we will scrap the investment deal and fund it with the company. As to the equity position—yes you would be getting a check for your position. Ultimately he would like to do so on a monthly basis to equity investors after about a 90-day waiting period.
Q: Regarding the property with 9 wells—how many are ready to produce oil right now? How about other wells in the area? What do you look for when considering these wells.
A: The current owner of these two leases he can pick up for $10K…aren’t really oil guys. They’ve owned them for 10 years and haven’t invested in maintaining the wells. IF they had the money to fix something they would, if not they would just let it go. There is room to drill some more wells. This is located on the Wagner Ranch. Look it up—it’s the largest ranch in America behind one fence. Its is currently for sale for $725 million and he actually has some friends looking at buying it. There are billions of barrels of oil under the Wagner ranch. The family owns 150 wells and the rest are on leases that were leased to companies that wanted to drill. These are older wells or we wouldn’t be getting them for $10K. But the potential is very good. We would have to turn the power back on, fix the salt water well, make few fixes and see what we can get out of the wells. Etc, etc.
As to what do I look for…if I knew how much money we had to work with. If I had $800K he could buy some serious production right now. This could produce up to 50-60 wells producing a day. What he’s looking for is the best bang for the buck…how much production for the money. In the case of the Wagner ranch leases, he has enough production information to be able to see that they’re paying taxes on the production, so they’re producing. He’s looking at deals from large to small—from 20,000 barrels a month to some small ones too. SK has been in TX for over a year and looking at deals constantly.
Q: Who files the forms with the SEC when you’re operating oil wells?
A: We’re doing a Reg D offering online through Edgar, so there are not SEC filings.
What follows are my questions which came, for the most part direct from the SEC website that raises red flag questions potential investors in private placements should make themselves aware of.
Q: Do you intend to release a private placement memorandum and the company’s financial statements before offering this? How soon?
A: He cannot provide the financials beyond the tax returns. The 504 doesn’t require financial statements. He will provide a rough/boilerplate private placement memorandum as soon as he can ascertain the direction shareholders want to proceed and how much money he has to work with.
Q: Do you intend this offering to be a restricted security? If so, did I hear correctly your expectation is shareholders will hold this new investment for 3-5 years minimum before there’s a plan to hold a registered offering allowing them to sell?
A: SK said, No, you didn’t hear correctly. SK said as a 504 this is not a registered.
NOTE: But according to the SEC website, this does appear to be confusing. Read it for yourself.
www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-private-placements-under-regulation-d
Q: Will you agree to a registered offering stipulation up-front?
A: He’s not sure.
Q: Which State would this offering be filed with—Alabama or Texas?
A: This will be a TX offering.
Q: Can you provide written assurance that this will comply with state securities laws, including state registration requirements or a state exemption from registration?
A: Yes, it will be in compliance with TX laws.
Q: Will this offering be common or preferred stock, limited partnerships interests, a membership interest in a limited liability company, or an investment product such as a note or bond?
A: This will be a 504 offering as described earlier.
Q: When do you look to offer this?
A: As soon as this can be figured out…interest level from shareholders and the amount of money required. If you’re interested in investing—email him at the company address. stevek@cmkmdiamonds.com
Q: What benefit is 50K shareholders from CMKM being a drag on this new venture of NHHI? What benefit is there to not BK CMKM and just run with NHHI as a new investment?
Q: Wouldn’t those “worthless” CMKM shares be worth more to the shareholder as a bona fide tax deduction rather than baggage for NHHI and moving forward?
Note: He blew apart at these two questions. He totally misunderstood them. I didn’t get answers until we spoke privately after the webinar was over. He admitted he did misunderstand them—thought they were gotcha questions, when my intent was sincere. He said he wasn't prepared for them. But he is the one that called shareholders shares in CMKX worthless. He is the one who said that the O&G business would be starting from scratch. Based on those comments early on, I thought these questions were fair to ask.
Why carry forward something that has died (according to him) into something that is a start-over from ground zero. Suffice to say his calmer better thought-out response over the phone was expressed in his concerns not to dump shareholders without the ability to bring value to their holdings through the effort of growing this new venture—should there be enough shareholder interest. Noble.
Apparently my line of questioning was too soon for him as his intention for the webcast was to offer a simply exploratory question into the viability of shareholder interest in further investing in NHHI.
I’m sure I missed some of the other things said during Q&A, several question were repetitive of what he covered regarding the equity and debt positions…or how fast they would see a return on their additional investment.
Perhaps someone else will have spent the three hours it took to listen and record some notes you can refer to.
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