History
A former pet-health shell turned oil and gas royalty buyer grew through 2014 deals, then fell into auditor disputes, bankruptcy in 2016 and SEC registration revocation in 2018.
2013-2014: From pet-health shell to oil and gas buyer
Core Resource Management, a Nevada company based in Dallas, was formerly a pet-health shell called Direct Pet Health Holdings. In 2013 it changed course and began buying working and royalty interests in oil and gas wells, funded by equity and senior notes. Its Form 10, filed in July 2013 to register it with the SEC, listed purchases from Mai Oil Operations (10 wells in Central Kansas), Nacona Production Company (6 wells and 2 saltwater disposal wells in Montague County, Texas) and Razorback Oil Interests (one gas well in Kingfisher County, Oklahoma). It also held a convertible note in, and some shares of, Nitro Petroleum.
In its first annual report, for 2013, Core reported a net loss of $2.0 million on total assets of $3.0 million, after $2.34 million of acquisitions that brought interests in 40 producing wells and 2 saltwater disposal wells. Its auditors doubted it could continue as a going concern unless it found further acquisition financing. Shares on issue stood at 11,081,618 at the end of 2013.
In March 2014 four directors resigned and Alex Campbell and Jeffrey Tregaskes joined the board. James D. Clark took over as chief executive from W. Brown Glenn Jr.
2014-2015: Deals and a changing of the guard
The second half of 2014 was busy. In August Core signed a joint venture with TransCoastal Corporation to drill up to 10 wells in the Texas Panhandle near Pampa. Core would fund the drilling and take 60% of net revenue until it had been repaid, then 50%.
Core also agreed to buy Nitro Petroleum, in which it already held a note and shares, in a stock merger at one Core share for every 10.5 Nitro shares. The merger closed on December 18, 2014, and Nitro redeemed Core's convertible note. In the same week Core bought oil and gas interests with a PV10 value (a standard estimate of future income) of nearly $1.8 million from White Stone Resources and Royal Energy Resources, both of Alberta, Canada, for 900,000 Core shares and about $400,000 of assumed liabilities. Shares on issue rose to 12,162,855 by the end of 2014.
In March 2015 Clark stepped down as chief executive and director Dennis Miller became interim chief executive.
2015-2016: Auditor dispute and bankruptcy
In August 2015 Core dismissed its auditor, Chapman, Hext & Co., citing fees well over quote and a disagreement over how non-GAAP figures were shown in the still-unfiled 2014 annual report. Chapman Hext replied that undocumented transactions had surfaced during the audit and that internal controls had significant deficiencies.
The 2014 annual report finally appeared in January 2016, nine months late. It showed a net loss of $4.9 million, including a $2.15 million charge tied to inducing debt holders, on total assets of $7.1 million. Management concluded its internal controls had a material weakness.
In March and April 2016 the chief financial officer and the chairman resigned, partly over the loss of directors' and officers' insurance, and Tregaskes left the board too, leaving Miller as the only director. On June 13, 2016 Core filed for Chapter 11 bankruptcy in Arizona. The record does not say what happened to the TransCoastal wells, Nitro or the Alberta assets in this period.
2016-2018: Revocation
The record is quiet after the filing. On December 21, 2018 the SEC revoked the company's registration by default. It had filed no periodic report since the 2014 annual report, and the proceeding had been delayed by a Supreme Court ruling on how the SEC's administrative judges are appointed. The company remained a defaulted Nevada corporation, and its bankruptcy case was still pending as of mid-2017. The SEC's order calls it a Chapter 7 filing, although the company's own filing said Chapter 11.
Written from the 16 story beats below (2013 to 21 Dec 2018), which come from the company's own announcements and filings.