Contrary to what some may try to tell you, Monday afternoon I made my first call to HENC Management in almost two years along with an oilman shareholder who holds just under 5% of the stock. In addition to the two of us, HENC was represented by its Treasurer and also its CFO. The former I have known going back a few years, the latter I have had no prior conversations with.
Was this form 15 filing a surprise to me? Yes on one hand, but in hindsight, knowing Managements history of lack of attention to the fact they are running a public company, it probably should not have been a surprise. Was I satisfied with their reasons after my discussion? I would have to say weak yes, the investor and both were, though I suppose I would have taken a different course if I were in the early loop. which for starters, I surely would have not chosen the words they did. Using the word de-listing, which gives the impression that the stock will no longer trade with all the same market makers bids and offers, exactly as it does now, is not the case. Nothing will change re trading or appearance on Level II quotes.
I delayed commenting here on my discussion here until I had a chance to check some things out about their PR and the consequences in filing a Form 15. While they did say in their PR that they would file the 15 on May 2, Tuesday, at our request I asked if they would hold it back until I got back to them. They honored my request, but after I confirmed that by they voluntarily filing the Form 15, rather than just not file their 10Q and then be forced to delist that the consequences are much different and that the only noticeable difference would be that it would suspend the requirement of SEC filings until they decided the time was right to go back under this regimen. They tell me it will save around $50k per quarter plus the hassle.
After checking with some of my audit contacts, I confirmed that this was correct. By filing the 15, anytime they want to go back to being a "full reporter", all they have to do is file a From 10 and will regain full status in about 60 days. They don't even have to catch up on past filings to come back.
I was told that it is their intentions to continue to issue public financial statements with auditor review, but by not having to file with the SEC, the cost is dramatically cheaper.
The crux of their argument was; "one of the main reasons for any company to maintain a current registration is to eventually use this to raise public money. Something that they have not done and don't see any likelihood of that happening until they have a few discoveries and cash flow. They have been supporting HENC up until now, and they will continue to support it. There is not, and has never been to date any thought about waking away from their investment."
I can confirm this in that I did ask, with my wealthy investor on the phone if they had a price that might interest them into selling at least the Holloman Corp 55 million shares. Mgmt and associates probably own an addition 10-15 million shares personally. The response we immediately got was that no logical price we could offer could make up for the real and intangible costs they have in this deal let alone the fact that they have not lost any confidence in the vast oil potential of the two fields.
We then asked if they would reconsider suspending registration if we came up with the cash to cover the maintenance. The answer was possibly, but other than as a low interest loan which they would not be likely with no kicker, they wouldn't want to dilute the shares at this low price and due to the difficulty of depositing even fully registered shares of non-listed stocks today, they would warn against it even if the share prices was higher.
While again, I would have done it differently, since most of the damage to the stock was already done based on just the announcement, I have to admit they made a good enough case that I would not further object.
Let me also add that I was a buyer in the .045 area as recently as a couple of weeks ago. Am I happy? No. Wish I would have waited a a bit longer. Will I buy more. Very likely. I want to continue to average down my very large position.
Regarding future drilling. We were told that even if HENC wanted to drill another well right now, the other two partners, TGC and Civelli, have no interest in putting up their share with oil at the current level. This also was factored in with the decision apply for the suspension to conserve capital.
So with this said.It does look like it will take a while longer and somewhat higher prices along with several months of price stabilization before we get the next well drilled, which will likely with a fourth partner.
