Replies to post #18719 on Pilgrim Petroleum Corp. (PGPM)

[awesomebummer]

What Matt said -


This, from his July update (please read slowly):

"PGPM signed an extension of the note due from ACLY at the beginning of May under the following basic terms: a) $2.4mm Cash still due (of the original $3mm APC Note) which will continue to accrue interest at the original rate set forth in the 2008 note, b) 557,783 shares of ACLY’s Preferred Series A stock convertible at 16 to 1 common and c) an extended maturity date of December 31, 2012. In addition, PGPM is negotiating other benefits from ACLY to potentially include an ACLY board position, a revenue sharing relationship on development of NW Texas leasehold, and immediate cash payments from interest and principal still due from the note extension...Some companies have contacted PGPM to purchase/acquire the Company’s ACLY equity position. My thought is to wait until there is a substantial increase in ACLY share value in order to maximize this equity position. The ACLY equity position has the potential to be worth between $10mm and $40mm short term assuming the ACLY completion of an audit, Russian acquisition, etc. This equity position in ACLY will be 12 months restricted if ACLY remains pink or 6 months restricted if ACLY achieves a successful up board move. A dividend payment of these shares is also being considered to current PGPM shareholders although I would hate for some smaller shareholders to receive a paltry few shares of ACLY that are not worth converting with their broker."

It is confusing, and I admit up front my math may be wrong, but it appears to me that the common stock value of the ACLY shares in the settlement process is 6+ cents/share, according to the terms above. Is it substantially different from this: $3.0 million less $2.4 million = $600,000. $600,000 divided by (557,783 x 16) = $0.067/share. (If, however, the $3.0 million is no longer part of the renegotiated outstanding amount, then the preferred shares would represent other compensation for the properties. We would need to know the real value of the ACLY stock offered).

Because Matt is a PGPM employee subject to ACLY officers who are also PGPM officers, this value is "forced" upon PGPM shareholders, since Matt would have "had" to accept it on behalf of PGPM. (Note: if the value is not being "forced" upon PGPM, show me the qualifying independent appraisal).

Then, we have this troubling email last week from Matt:

"The asset sale is some oilfield capital equipment as well as potentially a few Arcland Shares left over from 2008. Although Arcland's share price is so low now I'll probably hold off on selling the shares."

Uh-oh! To whom will the existing shares be sold? Privately to insiders of ACLY? PGPM? perhaps both? If so, that would constitute fraud, IMO. As in...insider self-dealing. IOWs, PGPM has been forced to take a valuation of 6 cents per ACLY share in the CURRENT note settlement process - per the direction of ACLY insiders - then "voluntarily" sell off some existing ACLY shares. Remember, PGPM owns at least 10% of ACLY, and I'm sure ACLY doesn't feel completely comfortable with that.

If the shares, however, are to be sold in the "open" market, why would Matt do that when he is in the process of "negotiating other benefits from ACLY to potentially include an ACLY board position,..." You don't sell the shares of a company that you are trying to get on its board. (Re: the more shares of a company you have, the greater the ability to get on its board, and the greater the clout, among other things).

Further, what happened to: "My thought is to wait until there is a substantial increase in ACLY share value in order to maximize this equity position. The ACLY equity position has the potential to be worth between $10mm and $40mm short term assuming the ACLY completion of an audit, Russian acquisition, etc." IOWs, why sell an asset that you feel so confident in its potential appreciation...that you would force it through the note settlement process upon PGPM stockholders at 6 cents per share, or 300 times current market value?

OK, someone show me the error of my analysis (I hope I am misinterpreting ACLY's stock valuation settlement at 6 cents!), or else this - too - and some additional things I have been troubled by, will be going in a letter to ACLY's latest beleaguered audit firm, and let them consider it. Maybe all is well...