NOTE 1. DESCRIPTION OF BUSINESS
Red Mountain Resources, Inc. ("Red Mountain", "we," "us" or the "Company") is a holding company that operates through its wholly owned subsidiaries, including Black Rock Capital, Inc. (“Black Rock”) and RMR Operating, LLC (“RMR Operating”). Red Mountain is engaged in the business of operating and investing in oil and gas properties in Texas and New Mexico through its wholly owned subsidiaries. Black Rock is a passive investor and does not operate its properties; however, RMR Operating acts as operator for a majority of the Black Rock properties.
Black Rock was originally formed on October 28, 2005 as an Arkansas limited liability company under the name “Black Rock Capital, LLC”. From inception through May 2010, Black Rock had no operations.
In May 2010, Black Rock entered into an agreement to purchase two separate oil and gas fields out of the bankruptcy estate of MSB Energy, Inc., which became effective as of June 1, 2010. Those fields are located in Zapata County and Duval County, Texas. In October 2010, Black Rock entered into an agreement to purchase two separate oil and gas fields located in Zapata County, Texas, also out of the bankruptcy estate of MSB Energy, Inc., which became effective on October 1, 2010.
On March 22, 2011, Black Rock entered into an agreement to be acquired by Red Mountain, a publicly traded shell company. For accounting purposes, Black Rock was treated as the acquirer and the transaction was treated as a recapitalization. The agreement provided for Red Mountain to issue 27,000,000 shares of common stock in exchange for all of the then outstanding equity of Black Rock. On June 22, 2011, the transaction was completed and the reverse recapitalization with Red Mountain was completed. Upon completion of the transaction, Red Mountain's $850,000 non-interest bearing Commercial Promissory Note issued by Black Rock on May 24, 2011 and its $4,900,000 non-interest bearing Secured Commercial Promissory Note issued by Black Rock on April 29, 2011 were extinguished. As a condition to the completion of the transaction, Black Rock assumed and acquired a loan of $2,681,201(the “Bamco Note”) from the First State Bank of Lonoke (“FSB”) that had previously been issued to Bamco Gas, LLC (“Bamco Gas”), which is in receivership. As a result, the Bamco Note was cancelled, Black Rock executed a new note to FSB (the “Replacement Note”) and the Replacement Note became the sole outstanding note owed to FSB by Black Rock. FSB also had the following requirements as conditions to completion of the transaction: (i) Alan Barksdale, Black Rock's sole officer, director and shareholder, was required to be the only officer as President of Black Rock and Chief Executive Officer of Red Mountain during the term of the loan; (ii) Black Rock's 1,000 common shares (100%) were to be pledged as collateral to secure the repayment of the Replacement Note; (iii) Black Rock's assets were to remain held in the name of Black Rock during the term of the loan; and (iv) 2,000,000 shares of common stock of Red Mountain were pledged to secure the repayment of the Replacement Note.
In June 2011, Black Rock filed Articles of Conversion with the Secretary of State for the State of Arkansas to convert from a limited liability company into a corporation. The conversion became effective July 1, 2011 and accordingly Black Rock was converted to “Black Rock Capital, Inc.” As a result of the conversion, all the membership interest holders of Black Rock Capital, LLC became shareholders of Black Rock. Black Rock and Red Mountain have adopted a fiscal year end of May 31.
AI
