U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20280 / September 13, 2007
SEC v. Terax Energy, Inc., et al., United States District Court for the Northern District of Texas (Dallas Division)
SEC Files Emergency Civil Action, Obtains Temporary Restraining Order and Asset Freeze Against Terax Energy, Inc., Westar Oil, Inc., and Mark Roy Anderson
On September 12, 2007, U.S. District Judge Barbara M. G. Lynn, of the Northern District of Texas, issued a temporary restraining order and asset freeze against Terax Energy Inc., Westar Oil, Inc., and Mark Roy Anderson, in an emergency civil action filed by the Securities and Exchange Commission. The Commission's complaint alleges that Anderson, of Los Angeles, California, is orchestrating an ongoing fraudulent scheme involving the stock of Terax Energy, Inc., a Dallas, Texas based oil and gas company that trades on the OTC BB. According to the complaint, after Anderson obtained undisclosed control of Terax in April 2007, Terax issued several false and misleading press releases, and the company's stock price increased from approximately $0.30 to as much as $4.88 per share. The complaint also alleges that Anderson fraudulently raised about $1 million from about 30 investors in a private placement of common stock by Westar, a private Nevada corporation he controls, after making false claims regarding its oil and gas operations, its purported pending initial public offering, and plans to exchange Westar stock for Terax stock.
The defendants in the Commission's civil action are:
Terax Energy, Inc., a publicly held Nevada corporation, with offices in Dallas, Texas (trading symbol TEXG.OB).
Westar Oil, Inc., a privately held Nevada corporation, with offices in Beverly Hills, California.
Mark Roy Anderson, 53, of Los Angeles, California.
Linda Contreras, 26, of Los Angeles, California. While Terax's filings with the SEC report that Contreras its CEO and sole director, the Commission's complaint alleges that she is Anderson's office assistant and that Anderson controls Terax and also Westar.
The Commission's complaint also names two entities controlled by Anderson as relief defendants, The September Trust and Camden Holdings, Inc., which are also subject to the Court's asset freeze order.
According to the Commission's complaint, Anderson was disbarred by the State Bar of Nevada in 1993 and was convicted in 1994 on federal mail fraud charges. The Commission's complaint alleges that through July 2007, while under Anderson's control, Terax has issued several materially false and misleading press releases announcing, among other things: (1) that the company intended to extend its leases and rework its wells in Erath County, Texas, resulting in expected net revenues from the wells of $750,000 per month; (2) Westar had executed a $175 million financing agreement on behalf of Terax with an unnamed New York energy lender; and (3) Terax had acquired a controlling interest in a publicly-held Canadian oil company. The Commission's complaint alleges that in fact, at the time the press releases were issued: (1) the Erath County leases had been placed into receivership by a state court judge and the lessor had advised Terax that he was terminating the leases; (2) the New York lender had never committed to the financing; and (3) the acquisition of the Canadian company did not close because Anderson stopped payment on the $2 million check to the Canadian brokerage firm that brokered the deal.
The complaint further alleges that Anderson and Contreras caused Terax to issue approximately 1 million "free trading" shares of its common stock in violation of the registration provisions of the Securities Act of 1933 ("Securities Act"). Camden Holdings and The September Trust, which Anderson controls, received 500,000 of those shares.
The complaint alleges that Terax and Anderson violated Sections 5 (a), (c) and 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder, that Westar violated Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and that Contreras violated Sections 5(a) and (c) of the Securities Act. The Commission's complaint seeks preliminary and permanent injunctive relief and a civil monetary penalty against all the defendants, as well as disgorgement of all illicit profits from Terax, Westar, Anderson, September Trust and Camden Holdings. The complaint also seeks officer and director and penny stock bars against Anderson.
Separately, the Commission issued an order, pursuant to Section 12(k) of the Securities Exchange Act of 1934, temporarily suspending trading in the securities of Terax, beginning at 9:30 a.m. EDT on September 12, 2007, and terminating at 11:59 p.m. EST on September 25, 2007. The Commission's order cites concerns about the accuracy and adequacy of publicly disseminated information concerning, among other things: (1) the status of Terax's oil and gas operations, (2) Terax's purported financing agreements, (3) Terax's supposed acquisition of a controlling interest in a foreign oil and gas firm, (4) the existence, terms and status of a purported share exchange agreement between Terax and Westar Oil, Inc., and (5) the identity of the persons in control of the operations and management of Terax. For further information, please see the Commission's order suspending trading, at www.sec.gov/litigation/suspensions/2007/34-56389-o.pdf, and its release regarding the suspension, at www.sec.gov/litigation/suspensions/2007/34-56389a.pdf.
[b]REVERSE MERGER Play:
WESTAR OIL TO GO PUBLIC VIA MERGER WITH TERAX ENERGY
Terax Energy Inc. is an independent, managed risk, gas exploration, development and production company, headquartered in Austin, Texas. Terax is focused solely on the optimal exploitation and development of large, mostly contiguous acreage blocks in the Barnett Shale play within the Fort Worth Basin of Texas.
Terax Energy Inc.
13355 Noel Road
1370 One Galleria Tower
Dallas, TX 75240
United States - Map
Web Site: http://www.teraxenergy.com
Shares O/S: 3.69M
Shares Float: 3.44M
May.1.2007 - In this 8K filing, WESTAR OIL acquires 55% of TEXG as of July.15.2007
Press Release Source: Westar
Westar Files 14C Formally to Change Name and Symbol
Friday August 24, 4:26 pm ET
DALLAS, TX--(MARKET WIRE)--Aug 24, 2007 -- Terax Energy (OTC BB:TEXG.OB - News) announced today that its has filed its Form 14C to formally change its name from Terax Energy Inc, to Westar Oil and Gas Inc. This filing will result in the name change and will process the symbol change. The actions were approved by the Board of Directors and consented to by the majority shareholder. The name change was decided in order to reflect the company future business direction and acquisitions plans.
Unregistered Sale of Equity Securities, Financial Statements and Exhibits
ITEM 3.02 Unregistered Sales of Equity Securities.
On July 23, 2007, Terax Energy, Inc. (the "Company") completed the sale of 55% of its issued and outstanding common stock to Westar Oil, Inc. (the "Purchaser"), pursuant to the Purchase and Sale Agreement ("Agreement") between the Company and the Purchaser, dated April 26, 2007. The purchase price of the shares was $0.21 per share, the closing market price of the Company's common stock on the date of the Agreement. At the closing on July 23, the Company sold 3.9 million shares to the Purchaser for $819,000. At a prior closing on April 30, 2007, the Company had sold 618,000 shares to the Purchaser for $129,780. Thus, the total consideration received in the transaction was $948,780 and the total number of shares purchased was 4,518,000. The Company used cash on hand to complete the purchase. The Company has previously reported the entry of the Agreement in a report on Form 8-K filed with the SEC on May 1, 2007.
The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") with respect to the foregoing, pursuant to the provisions of Regulation D of the Act. No commission or underwriter's discount was paid in connection with the sale to Westar. Item 5.01 Change in Control.
The Agreement gives the Purchaser the right to designate one member of the Board of Directors and the Company's chief executive officer. The Purchaser has designated Linda Contreras as the Company's sole director and chief executive officer, as reported in the Company's Form 8-K dated May 1, 2007, replacing Lawrence J. Finn, who resigned as the Company's chief executive officer and chief financial officer. The Company and the Purchaser are unaware of any other arrangements or groups regarding control of the Company or election of directors. Upon its purchase of 55% of the outstanding common stock of the Company, the Purchaser now has sufficient shares to elect all of the members of the Company's Board of Directors.
The Purchaser used cash on hand to pay the $978,780 purchase price.
5.03 Amendments to Articles of Incorporation. On July 26, 2007, the holders of a majority of the Company's outstanding shares voted, via written consent without a meeting, in favor of amending the Company's articles of incorporation to reflect a change in the Company's name to Westar Oil and Gas, Inc. The shareholders also voted to amend the articles of incorporation to increase the number of shares of common stock authorized for issuance from 15 million to 200 million. However, these amendments to the articles of incorporation have not yet become effective, as the Company must file and mail to all of its shareholders an information statement of pursuant to section 14(C) of the Securities Exchange Act of 1934. These amendments to the articles of incorporation will become effective as soon as the Company complies with the delivery requirements set forth in Regulation 14C under the Securities Exchange Act of 1934.
Item 7.01 Regulation FD Disclosure.
(a) On July 26, 2007, the Company's board of directors affirmed its intention to declare a 2 for 1 restricted share dividend
, subject to completion of all required disclosure and legal obligations to effect the dividend. The Company had previously disclosed its intention to declare a 1 for 1 restricted share dividend, but has decided it would be in the best interests of the shareholders to pursue a 2 for 1 dividend.
(b) The Company is also finalizing the terms of its share exchange with Westar. This share exchange is expected to close prior to the effectiveness of name change.
(c) The Company filed press releases on June 8, 2007, June 22, 2007, and June 29, 2007, which are attached hereto as exhibits.
(d) The information in this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.
Most recent Press Releases by Terax Energy:
Press Release Source: Westar Oil Inc.
Westar Oil Acquires Control of Truestar Petroleum
Wednesday July 25, 7:00 am ET
DALLAS, TX--(MARKET WIRE)--Jul 25, 2007 -- Terax Energy (OTC BB:TEXG.OB - News), soon to be called Westar Oil and Gas Inc. (Westar), announced that Westar has purchased on the open market a controlling shareholder position in Truestar Petroleum Corporation listed on the Canadian exchange. Westar purchased for cash nearly 18 million shares. Westar intends to dramatically increase the production and value of the assets of Truestar. The Texas-based assets of Truestar provide an amazing opportunity for Westar to develop. It is of particular advantage for Westar given the large acreage position and the close proximity of the Truestar leases to the Westar operations.
TrueStar recently reported its reserves prepared pursuant to National Instrument 51-101 guidelines. The company also prepared an evaluation using the guidelines as approved by the United States Securities Exchange Commission (SEC). Total proven reserves, using definitions approved by the SEC, at year-end 2006 were 33,046 MMscfe. The value, discounted at a rate of 10% was US$ 48.80 MM.
We believe the reserve definitions of the two countries are very similar. Nuances in the methodology for the assignment of reserves, primarily proven undeveloped, allow the SEC reserves to show a higher value than permitted through the National Instrument 51-101 definitions.
TrueStar Petroleum Corporation is an oil and gas exploration, development, and production company. TrueStar has interests in 34 producing gas wells in the Barnett Shale gas play in Texas located on nearly 4,000 acres and a 10% interest in a license for oil and gas development on 554,000 acres in Guatemala, and is awaiting the reassignment of the remaining 90% interest in the 554,000 acre License.
The closing of the transaction is subject to certain closing conditions, including, among other conditions: (i) receipt of all consents, or approvals required consummating the exchange and due diligence; (ii) neither the Companies having suffered any material adverse effect.
Other recent Headlines:
Friday June 29, 6:00 am ET
Westar Oil Increases Dividend, Set to Close $150 Million Dollar Purchase, and Acquires Acreage
Press Release on June 8th
states among other things:
"Westar also announced its intention to enter into a share exchange agreement with Terax Energy in which Westar shares will be valued at $24.50 per share and Terax shares will be valued at $6.75 per share. That exchange will be effective for all shareholders of record as of June 21, 2007.
Link to June 8th PR:
Press Release on June 22:
Furthermore, the company will be issuing a stock dividend to the shareholders of record upon the date the symbol changes
to Westar, which is expected to occur within the next 10 days. The stock dividend will be for the difference in the stock price on the date of the symbol change and the value of $6.75 per share.
The date of the symbol change is not announced
Link to June 22 PR:
These 3 press releases do not clearly state the number of Westar Oil shares the share holders will receive upon the merger or the date of the merger. According to Steven Taylor - Investor Relations, they do not have control over when it will happen - it may even take to a month. I am trying to get him to clarify the share exchange information.
Older Press Releases:
Feb.7.2007 - WESTAR OIL to go public, Valued at $15-$20:
Westar Oil to Become a Public Company,Last Update: 6:13 PM ET Feb 7, 2007
LOS ANGELES, CA, Feb 07, 2007 (MARKET WIRE via COMTEX) -- Westar Oil Inc. has completed its initial testing of its Railroad Valley property. As a result from that testing and other considerations, the Company announces its plans to become a public company. It is expected that the shares are to be valued between $15.00 to $20.00 dollars per share.
With the large acreage position that Westar has in its Railroad Valley property and other assets, the Company feels that it is wise to become a public company in order to capitalize on what is expected to be a very large oil and gas discovery.
Furthermore, the Company has submitted an application and is approved to drill an additional 14 new wells on the 26,000 acres that it owns in Railroad Valley.
Contact: Westar Oil Inc. (310) 275-9020
SOURCE: Westar Oil Inc.
Taylor Capitol, Inc.
Contact WESTAR OIL AT
Investor Relations: Linda Contreras