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They would get a hold of this information if LEXG were to file an 8-K with the SEC. However, since it is non material (for anything other than posting to boards like this), LEXG does not post this information as it would be considered immaterial pumping rather than material information worthy of an 8-K. Anything "of importance to security holders" would have an 8-K filed under Form 8-K Section 8 (or elsewhere depending on the nature of the "news". Also, if anyone has a Goldman Sachs account, please ask your salesperson or contact the analyst directly as to the relevance of this "news" to LEXG.
This also doesn't make sense. They are basically saying that they have the opportunity to buy these wells as they are better at getting funding than others in the market. Since their funding has been at 10% interest plus a huge number of stock warrants guaranteed (via the resets and floors) to be struck below the then-current price, this makes their implied funding costs immense. Even if you assumed 10% and somehow counted the warrants (and thus the stock) as worthless, 10% is a high funding cost as the average BB company (higher rated but still "junk") trades at 299 off the curve as of yesterday or about 4.75%. So what are the buying that is worthwhile to them at 10%+ and not interesting to someone funding at below 5%? It makes NO sense that their competitive advantage is access to funding when they have to resort to expensive dilutive death spiral converts to fund. I can't see what else the advanatge would be as it is not a long history of oil exploration, excellent operations (of this or other things like Alta was), or a huge experienced staff. If it is for synergies, then SonCav, not LEXG should be funding these tests as they actually own more than LEXG which owns rights to sell them in some areas and applications but does not own the intellectual property. The whole thing makes no sense.
If it's all there and you have the answers that you needed to know that 3 wells creates the flow rate LEXG needs, could you please just tell me what that flow rate is (which seems odd to just take an average which is what it sounds like) and why they needed that exact flow rate - i.e., do they need a certain amount of profits and how did you calculate the profits needed and those that will come from 3 wells? If it's all there please spell it out for those of us who are less good at coming to that obvious conclusion from what's on the computer. Also, if it is profits/cash/revenue they need and they are not buying oil assets for less than, for example, three years free cash flow (a better oil operator would buy assets at that price even small assets) then why not use the financing for these wells to complete the SonCav machine since I would imagine that proof of concept would take less than three years and thus require less dilutive financing which appears to be killing the company.
The flow rate they needed? What is that flow rate (e.g., barrels per day), without drilling how do you know the flow rate and how do you calculate that is what they needed? For what? Unlikely any flow from this region will be profitable at $50 all in (it is not the Permian Basin which barely breaks even there). What did this comment mean?
I don't see how oil revenues stop dilution. They had to pay for the oil asset with dilutive financing and no one would ever sell it at less than 3 to 5 years of profits at worst so the oil strategy is dilutive not anti- dilutive. Also, no one makes profits in this region at sub $50 oil all in.
Yes - a billion is not crazy. Look at the 10-Qs to see the face value of convertibles out and then figure they convert around 50% of the lowest stock price (or a minimum floor if the stock goes up) and calculate the number of shares needed to meet that obligation. Then assume that as there are no sources of profit in the near-term (even if there are oil revenues it is unlikely there will be oil profits with oil sub 50), they will issue more. Then these shares have to be sold which send the price down more which causes more dilution (since they convert into even MORE shares as the stock price goes lower). It gets super-duper ugly. That's why these are known as "death-spiral" converts and have not been used by anyone legitimate in more than 15 years when they help quicken EToy's trip to the grave.
The dilution is from all of the death spiral converts. Go through the latest 10-Q (or 10-K in this case) and see how many more are outstanding - they all convert at the lowest of a few days in a longer long back period so guarantee printing stock down from where it trades currently. For example, if the stock if .03 now and it traded at .02 for a couple of the past few days, they can convert at or close to .01 so a $50,000 convert would create $150,000 of new shares. The huge and increasing number of shares that are created as the stock goes down is why these are called "death spiral" converts and why, after a disaster with Etoys in the internet boom 15 to 20 years ago no legit / responsible company would fund this way, especially to invest in a oil field that real oil companies with access to reasonable funding didnt want (or could have had at a cheaper all-in cost as their funding costs are cheaper).
Too bad that even if the magic machine works, they don't have an exclusive license to sell it in Alabama.
Too bad that even if this is useful to someone (which is weird that they would dilute their stock with death spiral converts that lead to massive future stock issuance at at least a 50% discount to buy an old small oil asset if this is worth anything) they don't own the technology so they won't benefit if every major buys it.
The right to sell Glottech units (and pay Glottech a royalty) would be exclusive for NON-PETROLEUM MINING IN CANADA ONLY but Glottech can make even that use non-excludive by paying LEXG a royalty. So what you are owning when you own LEXG is a right to distribute Glottech units in Canada for non-petroleum mining. This right expires 10/1/2017 if they do not sell 25 units by then otherwise it renews every 5 years. This is from the sales and licensing agreements in the 8-K posted 10/10/12 as referenced in the latest 10-Q.
DILUTE-A-THON! 167.2MM shares outstanding on 10/13 up from 119.8MM on 7/27. Thanks, death-spiral convertible securities! The latest ones, which have not converted yet, are convertible into shares at the LOWER of .005 or 50% of the lowest of the latest 20 tradings days before conversion (i.e., if they were able to convert now they could convert and be buying shares for .0025 in addition to the interest they have gotten) - why would anyone buy the stock when the company is giving away stock at a 50% discount plus high (10%) rates of interest?!
What level of specific gravity, carbon chain and API results will you consider to be great news?
Isn't the 10-K extension period over? They filed the NT 10-K on 9/28 when they couldn't file the 10-K by September month end and that should have extended the deadline to 10/15 which has passed. Since nothing material ever happens at this company (with regard to new expenses, revenues, etc. other than more death spiral convertible security issuance) why can't they file on time (or at least within the extension period they said they would make when the were late the first time and filed the NT 10-K)?
I just watched the new videos on the LEXG site. Very impressive. The noise level is within key parameters and the vibration seems promising also. Also the oil is moving up and down the tube quite nicely without anything breaking and the colors on the pump are quite aesthetically pleasing. The water also looks hot enough on that gauge but I don't know if the volume of steam coming out of that hole meets my requirements. I'll have to wait until additional specific gravity data are released to make my final investment decision.
I just watched the new videos on the LEXG site. Very impressive. The noise level is within key parameters and the vibration seems promising also. Also the oil is moving up and down the tube quite nicely without anything breaking and the colors on the pump are quite aesthetically pleasing. The water also looks hot enough on that gauge but I don't know if the volume of steam coming out of that hole meets my requirements. I'll have to wait until additional specific gravity data are released to make my final investment decision.
Because it continually changes (from lithium exploration to waste water treatment to oil production and cavation), the old strategies are dumped at a loss, they self finance only from issuing massively dilutive "death spiral" convertibles which pay high interest rates and convert into shares at 65% of market or less (thus not requiring "investors" providing the financing to face risk until the stock gets super low like down here making it tougher to continue the game), the technologies that are supposed to be important (like cavation) are given little resources so that a truck supposedly carrying the future of the company is lost and takes weeks or longer to find and repair, and they don't even own the Glottech technology for oil related uses in most geographies (just non-exclusive rights to sell the machine that for some reason they are testing) and even though they are cash-constrained enough to do super-dilutive financing, they buy assets (like Alta or this distressed oil well) saying the "cash flow" will support research even though the cash they have to outlay to buy the assets is several years of cash flow (which never materializes) and it is all run by someone with no expertise in the area of lithium, waste water, or oil production with basically no staff who makes promises like "never selling low (on "The Chairman's Blog" in response to a Facebook sale by the Face book CEO) and then does in great size almost immediately afterward. At least that is why I don't believe it. Anyone else?
I think he or she might be referring to the newest security terms in the last 8-K which has the 8/12/16 purchase agreement where LEXG pays 10% interest PLUS 6.8% for legal expenses ($2500 of a $37,000 loan) PLUS the buyer gets to convert into stock at at 65% of the LOWEST price of the stock in the 20 days prior to converting. Then on 9/2/16 they entered into a bridge loan that can cause a $700,000+ loan to reset the convertible price to 50% of market - even lower. So AT WORST they buy stock 65% lower than where it traded the day before. Just a ton of financing (relative to the market cap) that amounts to the "investors" buying stock at a huge discount to market, not being restricted on reselling that stock immediately and getting paid high interest rates also. Ouch! Definitely super-dilutive.
However, realistically it is pretty tough to believe that it can take this long to repair and test the units. Also, the sale of the lithium assets, the sale at a major loss of the waste disposal assets, the resetting of the convertible securities to benefit the bond investor versus the stock investors for no reason in the bond documents, the fact that they dont even own the intellectual property behind the units but only own the sales rights to the units for limited purposes and geographies and the supposition that Alex Walsh will be able to run a distressed oil company more efficiently than an existing oil company are all pretty tough to swallow.
The cash flow argument makes no sense and was also used to justify the purchase of the waste disposal assets which were then sold soon after at a significant loss. Think of the basic argument - "I am going to spend $500,000 but I will get $10,000 of cash flow a year until my main business works." I know there is some supposed synergy with testing the unit but you shouldn't need to buy a distressed energy E&P asset to test these units. It's silly. I would be more efficient to take the $500,000 (or whatever it is even if much less) financing that would be used to buy the extraneous asset and use it to bring the SonCav units to profitability. Why would anyone think Alex Walsh has an advantage over an actual oil company in identifying, purchasing or running a distressed oil asset? It makes NO sense.
That last post was actually the upside - I have no position long nor short. A friend bought into this on momentum when it was near the peak and it got me curious about the company. That last post was actually the upside - assuming the technology is real and somehow they are able to fund it - the upside is that they have the right to distribute Glottech machines in Canada (which is not a top lithium producing country) for non petroleum related mining. I dont know what that is worth but I dont think it is much - if it were they probably would have been able to finance with other than death spiral convertibles with look-backs which pose no risk to the lender assuming they can sell the converted stock at any price and less risk when, as LEXG did, the convertible terms are reset in the middle of the period in favor of the lender for no apparent reason. I guess you could also suppose that somehow Alex Walsh has the resources and knowledge to purchase a distressed energy E&P company and make a profit on it that is a "bonus" but I dont think anyone is buying LEXG for that.
Update on exclusivity. The right to sell Glottech units (and pay Glottech a royalty) would be exclusive for non-petrochemical mining in Canada but Glottech can make even that use non-excludive by paying LEXG a royalty. So what you are owning when you own LEXG is a right to distribute Glottech units in Canada for non-petroleum mining. This right expires 10/1/2017 if they do not sell 25 units by then otherwise it renews every 5 years. This is from the sales and licensing agreements in the 8-K posted 10/10/12 as referenced in the latest 10-Q.
LEXG has no lithium assets nor does it own any lithium related technology. All it has is a 5 year right to sell the Glottech units which started in 10/1/2012 and expires in less than a year and a half on 10/1/2017 but renews automatically for 5 years if they sell 25 units by 10/1/17 and renews for 5 years for every 5 year period they sell at least 25 units. So they what you are buying on the upside if this works out, for an enterprise value of $3MM (market cap + debt owed less cash on balance sheet) is the right to distribute Glottech machines (Glottech would still own all interest in the technology) and it is not even disclosed whether that right would be exclusive to LEXG. Not sure how high reward would be.
From the last 10-Q (there is nothing more current related to Glottech):
On October 1, 2012, the Company entered into a sales agency agreement with GD International. The agreement shall replace all agreements entered previously. Pursuant to the agreement, the Company is appointed as GD International’s sales agent for the technology within the territory. As a consideration, 10,000 common shares of the Company shall be issued to GD International (issued: see d) above). GD International retains all right, title and interest in the technology. The term of this agreement will be an initial period of five years. The term shall be automatically renewable thereafter for successive five year periods provided that the Company has sold not less than 25 or more technology units during each applicable five year period.
From the same 10-Q related to the Mineral Permit (there is nothing more current related to mineral assets and mineral related assets and mining expenses have been 0 for years in the 10-Qs and 10-Ks):
The January 1, 2014 payment was not paid by the Company, and subsequent to the schedule payment date, the agreement was terminated.
With $14K in cash at the end of last quarter $2.9MM in current liabilities, no revenue and $100K operating cash drain per quarter they had better dovetail pretty quickly. The new 10-Q in the next week or couple of weeks should be interesting to see how they made it even this far as it would be very tough to do another "death spiral" convertible at this stock price or market cap.
From the last 10-K
We have no known mineral reserves and we may not find any lithium and, even if we find lithium, it may not be in economic quantities. If we fail to find any lithium or if we are unable to find lithium in economic quantities, we will have to suspend operations.
We have not spent any amounts which have been classified as research and development activities in our financial statements during the last two fiscal years.
We do not have enough cash on hand to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing.
Why would Alex Walsh as the sole employee of LEXG be able to maximize the value of a distressed oil producer (which would by all logic require a lot of capital investment prior to profitability or it would not be distressed) when LEXG has almost no cash (less than $14,000 as of the last 10-Q with no source of revenue) and he has no experience purchasing or running oil fields? The only M&A we saw were the purchase of oilfield services which were sold for much less than they were purchased for after a relatively short period of failure. This makes no sense.
As of 4/29/16 (latest public) there were 11,702 shares sold short or 0.3% of the average daily volume or 0.1% of the float so short interest, and thus the vulnerability to a short squeeze, is practically non-existent