Item 3.02: Unregistered Sale of
On
· Registrant's transfer agent (Pacific Stock Transfer Company , hereafter the "TA") did convert, even after Registrant requested the TA not to do so, a Note ofValley High Mining Company , Registrant's wholly owned subsidiary (hereafter, "VHMC") into common stock of Registrant. (For details of the associatedDelaware 251(g) reorganization, see Footnote below.) · Very simply, despite the conversion notice by the Noteholders, shares in Registrant should not have been issued. The Noteholders are owed money by VHMC (the predecessor issuer). Registrant does not owe this money. Accordingly, Registrant's shares should not be issued in satisfaction of VHMC's liability. · Upon discoveringNovember 3, 2020 such issuance of Registrant's (the parent's) common stock based on the subsidiary's Note, Registrant objected (specifically advising the TA such conversions were taken without Registrant's authorization). Registrant has taken actions at all times subsequent to remediate the illegal issuance of the parent's shares. For the reasons outlined in this 8-K and prior Current Reports, Registrant is not the responsible party on its subsidiary's (VHMC's) Note. · Indeed, the TA removed the restrictive legend on the Notes and the Registrant's shares so issued improperly became "free trading"-again without Registrant's authorization.
At all times subsequent, Registrant has worked to retract/reverse the TA's improper share issuance.
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Footnote: For a detailed description of the reorganization, see Registrant's
Form 8-K filed
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Those ongoing remedial actions include the following:
· OnNovember 3, 2020 , Registrant emailed the TA to not convert the VHMC Notes since VHMC's Notes were not assumed by Registrant in the reorganization and, accordingly, VHMC's Notes are neither Registrant's Notes (and/or liability). Such November email included a detailed explanation of Holding Company Reorganization Section 251(g) under the Delaware General Corporation Law. (As to that authority, see the Footnote above and theFebruary 27, 2018 Form 8-K re theDelaware 251(g) Reorganization, the latter herein incorporated by reference.) · Registrant issued its prior Current Reports in February as to this unauthorized issuance of shares conveying the then current status of these issues and committed to update such Current Reports…which it is here being done. Note as well that the prior Current Reports had a detailed 6 bullet "background" discussion (which is hereby incorporated by reference to the foregoing February Current Reports)-and which concluded: "…[a]ccordingly, Registrant's shares should not be issued in satisfaction of VHMC's liability…." · By letter datedFebruary 22, 2021 , Registrant instructed the TA to reverse the 78,530,130 share reservation involved in the Note conversion and, as of this date, the TA has NOT done so. In fact, the TA responded in aFebruary 23, 2021 email acknowledging, among other matters, that it (i) will not issue further Registrant shares to VHMC Noteholders and (ii) had issued Registrant's common shares to VHMC Noteholders. (A copy of the associated TA correspondence--to and from-was attached as Exhibit 10.1 to the 8-K filedFebruary 25 , 2021-which, again, is hereby incorporated by reference.) · In addition, management has written aFebruary 24, 2021 demand letter to all VHMC Noteholders who received the shares in the wrong entity (in other words, the Registrant) seeking return of Registrant's common so issued. (A copy of that letter to the individual Noteholders is attached as Exhibit 10.2 to the 8-K filedFebruary 25, 2020 · As of the date of this Form 8-K, Registrant believes the following information regarding the VHMC Noteholders and wrongly converted Registrant common shares to be true: · Noteholder 1: 21,468,620 Registrant common shares in the aggregate have been issued. Based on two Schedules 13G filed, all of such shares were issued, Noteholder 1 currently is not on Registrant's shareholder list and perhaps such Registrant's shares have been sold. · Noteholder 2: 12,127,129 Registrant common shares have been issued relative to a VHMC Note originatedJanuary 2018 , Noteholder 2 currently is not on Registrant's shareholder list and perhaps such Registrant's shares have been sold. · Noteholder 3: 12,127,129 Registrant common shares have been issued relative to a VHMC Note originatedJanuary 2018 , Noteholder 3 currently is not on Registrant's shareholder list, and perhaps such Registrant's shares have been sold. · Noteholder 4: 16,089,429 Registrant common shares have been issued relative to a VHMC Note originatedJanuary 2018 , Noteholder 4 currently is on Registrant's share-holder list and we presume such Registrant's shares have not been sold. · Noteholder 5: 2,500,000 Registrant common shares have been issued relative to a VHMC Note originatedOctober 2017 , Noteholder 5 currently is on Registrant's share-holder list and we presume such Registrant's shares have not been sold. · Noteholder 6: 5,000,000 Registrant common shares have been issued relative to a pre- 251(g) debt conversion, Noteholder 6 currently is not on Registrant's shareholder list, and perhaps such Registrant's shares have been sold. 3 · Noteholder 7: 5,000,000 of Registrant common shares were placed on STOP by the Registrant onDecember 2, 2020 , Noteholder 7 currently is on Registrant's shareholder list and we presume such Registrant's shares have not been sold. · Noteholder 8: 3,750,000 Registrant common shares have been issued relative to a VHMC Note originated, Noteholder 8 currently is on Registrant's shareholder list and we presume such Registrant's shares have not been sold. · Management and/or its counsel is in continuing discussions with the TA and the affected Noteholders. · Registrant, via an email dateMarch 14, 2021 , has advised counsel for the Noteholder that the shares improperly acquired should be returned to the TA for cancellation and, if not, at minimum, the Noteholder(s) who hold or held more than 5% of the common shares through this improper conversion should file a "beneficial shareholder report" required under Section 13 of the Securities Exchange Act of 1934 (the "'34Act"). · In response, one Noteholder (Noteholder 1 and the "Reporting Noteholder"): · Filed a Schedule 13G Report as ofDecember 17, 2020 pursuant to Section 13(g) relating to 15,468,820 shares of Registrant's shares. Registrant does not have sufficient facts to agree with (i) the specifics of the Schedule 13G, noting that it is not clear that the Reporting Noteholder qualifies (must be a bank, a B-D or other "institutional investor" for use of the "short form" Schedule 13G) and (ii) the number of shares issued by the TA (21,468,620) to the Reporting Noteholder is well short of the 15,468,820 the Noteholder Reports as of itsDecember 17, 2020 Report Date. · Even more confusing is that on or aboutMarch 11 , the Noteholder filed an Amendment to the Schedule 13G arguing it was correcting a "typographical error," instead advising that the Noteholder owned 0 shares (not the 15,468,820 or the TA reports respectively of 21,468,820). · Noteholder 1 also have 78,531,380 common shares on reserve with the Transfer Agent. Registrant sent numerous emails to Transfer Agent to cancel the common shares from reserve, but as of report date, the Registrant have been unsuccessful. · To date, none of Noteholders has agreed to return the shares as requested and counsel for the several parties continues to be in communication. · It continues to be management's belief the free trading shares affected Registrant's stock over the last 60 days. Moreover, management is in the process of contacting the brokers who currently may have remaining improperly issued Registrant common shares to stop selling and contacting the VHMC Noteholders to return such improperly issued stock immediately. Management reiterates that it will report more details of counsel's finding as relevant information becomes available. · Management also recognizes that the shares improperly issued--if allowed to stand--were dilutive in character (and therefore could require particulars as to Item 2.06, "Material Impairment") and, even though not "sales" as defined, constituted the unregistered issuance of securities (Item 3.02). Registrant seeks to have cancelled those improperly issued shares and are working to so accomplish. · Registrant, through its management and counsel, will take all judicious, cost-effective remedial means to protect the interests of Registrant and its shareholders. All courses of action are on the table. We will have more to report on such remedial actions as events dictate.
While future events may impact Registrant's disclosures, please be advised that (as things stand today and as a result of our efforts due to reconciling records and verifying third party reports, 50,722,878 common shares have been presumably sold into the open market and 27,339,429 of Registrant's common shares are currently on Registrant's shareholder's list. Accordingly, man-agement of Registrant believes there that a cumulative 78,062,307 of Registrant's common shares have been issued improperly by the TA to VHMC Noteholders. We are working to get those improperly issued common shares of Registrant reconciled, returned, cancelled and/or sales proceeds remitted to Registrant. If we are successful in reversing this improper share issuance, the number of Registrant common shares would be the same before and after the improper issuance of Registrant's common to VHMC Noteholders. If we are not successful in the return of Registrant shares, their cancellation or the return of any sales proceeds from the improperly issued shares (as events dictate), disclosures so addressing will be the subject of a future Form 8-K.
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