Monday, June 25, 2007 3:36:34 AM
(Clovelly, TXHE, Laurus Master Fund, and MXXR
For the record, I restate my assertion that MXXR's and TXHE Clovelly "deal" was solely for Bargaining Purposes. TXHE needs the revenue from Clovelly as much as MXXR
The 28-Feb-2007 10QSB/A discloses a signficant venture capital investment: "On March 28, 2006 (the "Closing"), Texaurus entered into a Securities Purchase Agreement ("Securities Purchase Agreement") with Laurus Master Fund, Ltd. ("Laurus"); a Registration Rights Agreement with Laurus ("Registration Rights Agreement"); issued Laurus a Common Stock Purchase Warrant (the "Texaurus Warrant"); entered into a Master Security Agreement with Laurus; sold Laurus a Secured Term Note in the amount of $8,500,000 (the "Note"), and entered into various other agreements described below. Additionally, in connection with the Closing, we issued Laurus a Common Stock Purchase Warrant (the "Texhoma Warrant")..." [2]
The 10QSB/A reports that TXHE used the proceeds of this deal with Laurus to buy an interest in the Edgerly field. "On March 28, 2006, with an effective date of January 1, 2006, Texaurus closed a Sales & Purchase Agreement to purchase certain interests in the Barnes Creek gas field and the Edgerly field from Kilrush Petroleum, Inc. Texaurus paid the $5,225,000 purchase price with proceeds received from its sale of the Secured Term Note with Laurus."
The Laurus investment came with strings attached. The 10QSB/A states that the Laurus investment took the form of a note - i.e. a loan. The 10QSB/A states: "In connection with the Securities Purchase Agreement, Laurus Master Fund, Ltd. ("Laurus"), purchased a $8,500,000 Secured Term Note from Texaurus, which bears interest at the rate of 10.25% per year (as of November 29, 2006), which is due and payable on March 27, 2009, and which principal is repayable by way of a production payments equal to 80% of the gross production revenue received by Texaurus in connection with the Intracoastal City Field, the Edgerly and the Barnes Creek Properties." [3]
It is an open question whether TXHE will be able to repay the Laurus note. The current revenue stream does not appear to be sufficient. According to the 10QSB/A:
"In connection with the Securities Purchase Agreement, Laurus Master Fund, Ltd. ("Laurus"), purchased a $8,500,000 Secured Term Note from Texaurus, which bears interest at the rate of 10.25% per year (as of November 29, 2006), which is due and payable on March 27, 2009, and which principal is repayable by way of a production payments equal to 80% of the gross production revenue received by Texaurus in connection with the Intracoastal City Field, the Edgerly and the Barnes Creek Properties."
"There can be no assurance that we will have sufficient funds to pay any principal or interest on the Note when due on March 27, 2009, if such repayment amount is not sufficiently covered by the payment of production proceeds to Laurus, as described above. If we do not have sufficient funds to pay the total remaining amount of the Note (after taking into account payments of principal, which we may not have sufficient funds to pay) when due, we will be in default and Laurus may take control of substantially all of our assets (as described in more detail under "Risks Relating to the Company's Securities"). As a result, we will need to raise or otherwise generate approximately $8,500,000 to repay the Note (not including any adjustments for payment of principal in connection with production payments paid by Texaurus) by March 27, 2009. If we fail to raise this money, we could be forced to abandon or curtail our business operations."
In connection with this investment by Laurus, it appears that Jacobs put more of his own money into the company. "Frank Jacobs, our Executive Chairman and one of our Directors, and the President, Chief Executive Officer and a Director of Texaurus provided $300,000 of personal funding to Texaurus in connection with the funding, by way of a subscription for 7,500,000 shares of our common stock at $0.04 per share."[4] The fact that an insider is apparently putting more of his own hard cash into the company could suggest confidence that management does have a realistic hope of turning this company around.
The currently claimed revenue stream is about $2.88MM per year. 80% of that belongs to Laurus or about $2.3MM per year. (Note that this leaves only about $500K in cashflow to be retained by the company.) The Laurus note is due in March 2009. Two years of revenue off the existing production will only cover about half of the debt to Laurus. Presumably the insiders at TXHE are not stupid. Presumably the folks at Laurus aren't stupid either. The insiders have stuck with this company for quite some time even in the face of no revenue at all until now. They must have some plan for covering the other $4MM.
For the record, I restate my assertion that MXXR's and TXHE Clovelly "deal" was solely for Bargaining Purposes. TXHE needs the revenue from Clovelly as much as MXXR
The 28-Feb-2007 10QSB/A discloses a signficant venture capital investment: "On March 28, 2006 (the "Closing"), Texaurus entered into a Securities Purchase Agreement ("Securities Purchase Agreement") with Laurus Master Fund, Ltd. ("Laurus"); a Registration Rights Agreement with Laurus ("Registration Rights Agreement"); issued Laurus a Common Stock Purchase Warrant (the "Texaurus Warrant"); entered into a Master Security Agreement with Laurus; sold Laurus a Secured Term Note in the amount of $8,500,000 (the "Note"), and entered into various other agreements described below. Additionally, in connection with the Closing, we issued Laurus a Common Stock Purchase Warrant (the "Texhoma Warrant")..." [2]
The 10QSB/A reports that TXHE used the proceeds of this deal with Laurus to buy an interest in the Edgerly field. "On March 28, 2006, with an effective date of January 1, 2006, Texaurus closed a Sales & Purchase Agreement to purchase certain interests in the Barnes Creek gas field and the Edgerly field from Kilrush Petroleum, Inc. Texaurus paid the $5,225,000 purchase price with proceeds received from its sale of the Secured Term Note with Laurus."
The Laurus investment came with strings attached. The 10QSB/A states that the Laurus investment took the form of a note - i.e. a loan. The 10QSB/A states: "In connection with the Securities Purchase Agreement, Laurus Master Fund, Ltd. ("Laurus"), purchased a $8,500,000 Secured Term Note from Texaurus, which bears interest at the rate of 10.25% per year (as of November 29, 2006), which is due and payable on March 27, 2009, and which principal is repayable by way of a production payments equal to 80% of the gross production revenue received by Texaurus in connection with the Intracoastal City Field, the Edgerly and the Barnes Creek Properties." [3]
It is an open question whether TXHE will be able to repay the Laurus note. The current revenue stream does not appear to be sufficient. According to the 10QSB/A:
"In connection with the Securities Purchase Agreement, Laurus Master Fund, Ltd. ("Laurus"), purchased a $8,500,000 Secured Term Note from Texaurus, which bears interest at the rate of 10.25% per year (as of November 29, 2006), which is due and payable on March 27, 2009, and which principal is repayable by way of a production payments equal to 80% of the gross production revenue received by Texaurus in connection with the Intracoastal City Field, the Edgerly and the Barnes Creek Properties."
"There can be no assurance that we will have sufficient funds to pay any principal or interest on the Note when due on March 27, 2009, if such repayment amount is not sufficiently covered by the payment of production proceeds to Laurus, as described above. If we do not have sufficient funds to pay the total remaining amount of the Note (after taking into account payments of principal, which we may not have sufficient funds to pay) when due, we will be in default and Laurus may take control of substantially all of our assets (as described in more detail under "Risks Relating to the Company's Securities"). As a result, we will need to raise or otherwise generate approximately $8,500,000 to repay the Note (not including any adjustments for payment of principal in connection with production payments paid by Texaurus) by March 27, 2009. If we fail to raise this money, we could be forced to abandon or curtail our business operations."
In connection with this investment by Laurus, it appears that Jacobs put more of his own money into the company. "Frank Jacobs, our Executive Chairman and one of our Directors, and the President, Chief Executive Officer and a Director of Texaurus provided $300,000 of personal funding to Texaurus in connection with the funding, by way of a subscription for 7,500,000 shares of our common stock at $0.04 per share."[4] The fact that an insider is apparently putting more of his own hard cash into the company could suggest confidence that management does have a realistic hope of turning this company around.
The currently claimed revenue stream is about $2.88MM per year. 80% of that belongs to Laurus or about $2.3MM per year. (Note that this leaves only about $500K in cashflow to be retained by the company.) The Laurus note is due in March 2009. Two years of revenue off the existing production will only cover about half of the debt to Laurus. Presumably the insiders at TXHE are not stupid. Presumably the folks at Laurus aren't stupid either. The insiders have stuck with this company for quite some time even in the face of no revenue at all until now. They must have some plan for covering the other $4MM.
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