Each one in plain English, with the numbers worked through for a shareholder.
2 Dec 2008financial restatement▼ BadMajor
The company said its 2007 annual report (10-KSB/A) should no longer be relied on, because a $2 million debt forgiveness from Stillwater was booked as 2006 income and should instead be recorded as additional paid-in capital. The 2006 net loss increases by $2 million; total equity is unchanged by the move. Revised statements will be filed in Amendment No. 2, and the auditors agree with the change. This revisits the 2006 Stillwater forgiveness noted in the company's history.
21 Oct 2008capital raising announcement● NeutralMajor
On October 15, 2008 the company and Hemiwedge Valve Corporation transferred assets and granted licence rights for the Hemiwedge valve technology to Tejas Research & Engineering for $3.5 million in cash plus a 5-year warrant for 2,443,269 shares at $0.25 (about 9.99% of shares outstanding). The licence covers sub-sea, offshore, drilling and workover, surface safety and all downhole fields, plus two pending patent applications and trademark use in those fields; Tejas transferred the warrant to Intervale Capital. This appears to be the HemiWedge licensing deal flagged earlier as pending, though the filing does not link them, and it covers the downhole and sub-sea applications.
What it means for a shareholder
2.4m new shares at $0.250 to raise about $610,817. Shares on issue before the raise aren't in the record, so the dilution can't be worked out.
14 Oct 2008asset acquisition disposition● NeutralMajor
The sale of Shumate Machine Works' assets to American International Industries closed on October 8, 2008, at an aggregate price of $6,703,749: the buyer took over $5 million of Stillwater notes plus $1,703,749 of other liabilities. The company expects to issue about 1,401,170 shares (about $420,351 at $0.30) to the buyer under the working-capital adjustment, subject to final calculation within 45 days. Larry Shumate resigned as President, CEO and Chairman, and Kenton Chickering III, previously head of Hemiwedge Valve Corporation, replaced him. This resolves the pending sale and removes the contract machining business, leaving Hemiwedge as the remaining operating subsidiary named in the filing.
On August 29, 2008 the company and its subsidiary Shumate Machine Works agreed to sell substantially all of Machine Works' assets to American International Industries for $5,000,000 plus assumed liabilities. The $5,000,000 could be paid in cash or by the buyer taking over the company's Stillwater term notes (up to $5,000,000). The deal was conditional on the buyer getting Stillwater financing, and closing was expected around October 1, 2008. Up to $700,000 of company stock (price capped at $0.40) could be issued to the buyer if liabilities exceed working assets.
On May 23, 2008 Stillwater agreed to lend the company $625,000 for working capital, at prime plus 2%, maturing August 31, 2008. It is secured by receivables, equipment, inventory and the stock of Shumate Machine Works and Hemiwedge Valve Corporation, and Shumate, Flemming and Clark each guarantee up to 50% of the outstanding amount. This adds a short-term loan on top of the January 2008 facilities and again leans on executives' personal guarantees.
On January 25, 2008 the company and its subsidiaries signed an amended loan agreement with Stillwater. A new term note of $3,329,000 replaces the old one (about $3,003,998 outstanding), now due April 19, 2010 instead of April 2008, and a new $1,000,000 revolver (about $893,676 drawn) runs to April 19, 2009. Both carry prime plus 2%, and now also have a security interest in certain personal assets of CEO Larry Shumate. This pushes out the maturity of the debt that was due in April 2008, supersedes the earlier balloon structure, and the term note requires 26 equal monthly payments from February 28, 2008 sized to amortise over 64 months.
13 Nov 2007material agreement termination▼ BadMajor
On November 5, 2007 Sunbelt terminated the August 2007 agreement to be acquired by the company. The filing says the principal reason was the company's inability to obtain the financing the closing required. The company now plans to buy about $2 million of equipment and lease a building next to its Conroe plant to make more HemiWedge valves, which management says would dilute shareholders less than the Sunbelt deal would have. This ends the Sunbelt thread without a deal.
On August 17, 2007 the company agreed to buy Sunbelt Machine Works Corporation for about $14,500,000: $9,000,000 cash, about $0.5 million of assumed debt, a $2.5 million note and $2.5 million of company stock. Closing depended on the company raising at least $14,000,000 in financing and was expected by September 30, 2007; a $150,000 break-up fee applies to certain terminations. This would be the company's first acquisition since HemiWedge, and it is not completed.
16 July 2007capital raising announcement● NeutralMajor
On July 10, 2007 the company agreed to issue a $2,000,000 convertible note (10%, one-year term, convertible at $1.89) and a warrant for 400,000 shares at $1.89 to a single accredited investor, with net proceeds of about $1,850,000 for working capital and general corporate purposes. The note must be prepaid if the company completes a later equity financing within 12 months. This adds new debt and potential dilution; SMH Capital was paid $140,000 in commissions.
