Business Context and Reporting Period
This Form 8-K filing by Ring Energy, Inc. covers events occurring on April 27, 2012, and May 3, 2012. The company is incorporated in Nevada and operates in the oil and gas sector. The report details a material definitive agreement to acquire Sanford Energy, Inc. and the completion of a private equity offering.
Key Financial Metrics and Transactions
- Equity Offering: Completed an offering of 823,524 shares at $4.25 per share, generating gross proceeds of $3,499,977.
- Acquisition Consideration: Agreed to acquire Sanford Energy, Inc. for 3,440,000 shares of Ring Energy common stock.
- Existing Debt/Loans: Ring Energy has previously loaned $1,500,000 to Sanford Energy, evidenced by promissory notes bearing 5% interest, due by January 31, 2013.
- Transaction Fees: A non-refundable transaction fee of $250,000 was previously paid to Sanford Energy.
- Equity Compensation: Ring Energy will assume options to purchase up to 1,125,000 shares of its common stock (converted from Sanford Energy options).
Material Changes and Agreements
On May 3, 2012, Ring Energy entered into a Stock-For-Stock Exchange Agreement to acquire all outstanding shares of Sanford Energy, which holds oil and gas interests in Andrews County, Texas. The transaction is scheduled to close on May 11, 2012, with an effective date of January 1, 2012. Upon closing, Ring Energy will:
- Issue 2,220,000 shares to L. Tim Rochford and 1,220,000 shares to Stanley McCabe.
- Increase the Board of Directors to six members, appointing Rochford and McCabe as directors.
- Appoint William R. Broaddrick as Treasurer and Controller.
- Relocate principal executive offices to Tulsa, Oklahoma.
Outlook, Risks, and Contingencies
The closing of the acquisition is contingent upon the completion of customary due diligence and verification of the valuation of Sanford Energy's property interests. The agreement may be terminated by mutual consent, material breach, or if closing does not occur by May 31, 2012. The shares issued in both the acquisition and the recent equity offering are unregistered and subject to resale restrictions under the Securities Act. The filing does not provide specific revenue, profit, or cash flow projections for the combined entity.
Key Facts for Investor Verification
- Verify the valuation of Sanford Energy's oil and gas properties in Andrews County, Texas, as this is a closing condition.
- Confirm the dilution impact of issuing 3,440,000 shares plus 1,125,000 option shares to existing shareholders.
- Monitor the status of the $1,500,000 loan to Sanford Energy and its treatment in the closing.
- Check for any updates regarding the May 11, 2012 closing date and the May 31, 2012 termination deadline.
- Review the impact of the $250,000 non-refundable fee already paid on the company's liquidity.