Item 8.01 Other Events
Bakken Resources, Inc.
(Bakken, the Company, us, we, our) issues this Current Report on Form
8-K in order to disavow two recent filings on Form 5 and Schedule 13D submitted
by a Bakken shareholder named Allan Holms on February 13 and February 14 of
2017, respectively. Allan Holms filings improperly report that he acquired the
26,235,000 common shares from his recently deceased half-brother, Val M. Holms,
by means of two transactions during the second half of 2016. These purported
transactions took place following our May 5, 2016 announcement on Form 8-K, that our board terminated Val M. Holms as CEO for
cause in part due to findings that he took a $200,000 kickback of company funds
through his unauthorized activity. Allan Holms Form 5 and Schedule 13D filings
in question also improperly identify Allan Holms as a director and officer of
the Company, and the Company has concerns regarding authenticity of the stock
power documentation underlying Allan Holms purported transactions. The Company
requested that Allan Holms withdraw the Form 5 and
Schedule 13D (or take similar action) filings by the close of business on February 16, 2017, and Allan
Holms has not done so.
Allan Holms Recent
Filings
The recent Form 5 and Schedule
13D improperly report Allan Holm accumulated 46.24% of our common stock in
26,236,000 shares from his half-brother Val M. Holms, also indicating that Allan
Holms is both a director and officer of the Company. The Company does not
recognize the purported transactions, nor does it recognize Allan Holms as a
director or an officer. Each filing is explained below, followed by some of our
reasons for disavowing them both.
Form 5 filed February 13,
2017
Allan Holms Form 5, filed
February 13, 2017, indicates that Allan Holms became an officer, director, and
an owner of the Company holding more than 10% following two transactions that
transferred all 26,235,000 of Bakken common stock previously owned by Val M.
Holms. Those two transactions are said to stem from: (1) an August 1, 2016
Representation Agreement for Val M. Holms to transfer 13,117,500 common shares
to his half-brother Allan Holms, and (2) a December 10, 2016 Assignment
Agreement for Val M. Holms to transfer his remaining 13,117,000 common shares to
his half-brother Allan Holms. As consideration for the first transfer, Allan
Holms hired a law firm with a $10,000 retainer for his half-brother Val M. Holms and
agreed to split any amount the firm might recover. Allans Form 5 did not
disclose any definite payment beyond $10,000, meaning that Allan Holms up front
cost to acquire Vals first 13,117,000 shares was roughly eight-one-hundredths
of a cent ($0.00076) per share. Bakkens stock was quoted at $0.13 on the date of the first transfer on August 1,
2016. As consideration for the second transfer, Allan Holms reportedly forgave a
$1,088,000 debt owed by his half-brother Val M. Holms and generally released Val
M. Holms from any past or future liability surrounding certain ongoing
litigation. The Form 5 disclosed no definite payment beyond forgiving
$1,088,000, meaning that Allan Holms up front cost to acquire the remaining
13,117,000 shares was roughly eight cents ($0.0829) per share. Bakkens stock
was quoted at
$0.14 a day before the second
transfer on December 10, 2016. For all 26,235,000 shares, Allan Holms average
up front cost was roughly four cents ($0.0419). Substantially all of the consideration relies upon the existence of an alleged debt owed by one half-brother (Val M. Holms) to another (Allan Holms). The Company has no supporting documentation to evidence this debt, and Allan Holms' counsel claims that he lacks authority to provide it.
Schedule 13D filed February 14, 2017
Allan Holms’ Schedule 13D, filed
February 14, 2017, discloses the same information as his Form 5 but also provides further information. The Schedule 13D
indicates that Allan paid for Val M. Holms’ shares with personal funds, and that Allan Holms also previously acquired
355,000 shares from Jay Edington with personal funds on October 31, 2014. Item 5 of Allan’s Schedule 13D indicates
that
the purpose of these transactions was to replace our board with Allan and two others, which would then appoint Allan
“as president of the Company.” The apparent basis for this claimed purpose was Allan’s attempted takeover
of the Company on July 20, 2016, which we disclosed in a Current Report on Form 8-K filed July 26, 2016. As described in
that
Current Report, Allan Holms attempted takeover constituted triggering events under existing financing agreements that allowed one
of our
investors/lenders, Eagle Private Equity (“Eagle”), to exercise certain rights to obtain 600,000 shares of our
Series A Preferred Stock, which has the voting power of 60 million shares of our common stock.
Why the Company Disavows Allan Holms’ Recent Form 5 and Schedule 13D
Bakken does not recognize the validity of Allan Holms’ purported transfers, nor does the Company recognize that Allan Holms was legally permitted to attempt such transfers in the first place. As described below, we question validity because the Medallion Signatures underlying documentation of both transfers cannot be verified, and we question legal permissibility to execute such transactions because injunctions from Nevada and Montana courts forbade such activity.
Medallion Transfer Guarantee
Both the Form 5 and Schedule 13D in question indicate that the two disclosed transactions relied on Stock Powers documents dated December 10, 2016. Each of the Stock Powers contained a Medallion Signature Guarantee mark. Such marks are part of widely-recognized programs – the Medallion Signature Guarantee programs – in which many American and Canadian transfer agent and financial institution participates. The purpose of these programs is to ensure authenticity and prevent fraud in the transfer of securities. Participating financial institutions will mark documents with special ink and thereby guaranty authenticity or else indemnify losses resulting from fraud.
Like most American transfer agents, our transfer agent – Nevada Agency and Transfer Company (“NATCO”) – requires a Medallion Signature Guarantee mark in order to process the kind of transfer that Allan Holms requested. The Medallion Signature Guarantee mark that Allan Holms provided to NATCO in early February of 2017 appeared to have been guaranteed by Washington Trust Bank (“WTB”). However, a letter from WTB’s in-house counsel dated February 9, 2017 stated: “This is to confirm that WTB is unable to verify the Medallion Stamps on the Holms transaction.” As of this filing, Allan Holms has not addressed this issue, and he has provided NATCO with no alternative documentation permitting NATCO to execute the transfers that Allan Holms reported in his Form 5 and Schedule 13D filings.
Outstanding Injunctions
Had Allan Holms provided NATCO with acceptable documentation, he would have done so in violation of outstanding injunctions issued by the Montana and, possibly, Nevada state courts.
A Montana restraining order
issued on July 22, 2016 remains in place against Allan and Val Holms.
1
It restrained Val M. Holms from
taking any action of any kind that could have a material detrimental impact on
[Bakkens] business/operations. Val transferring 26,235,000 shares to Allan
Holms in order to replace our board and management directly violated this
restraint. The order also restrains, in relevant part, Allan Holms from taking
any actions on behalf of [Bakken] including attempts to replace [Bakkens]
Board, Corporate Officers or [Bakkens] attorneys, from representing to any
person or entity that [he is a] Director of [Bakken] with authority to conduct
business or take actions on behalf of [Bakken], from attempting to act on
behalf of [Bakken] in any manner whatsoever, and from taking any actions that
could affect the business/operations of [Bakken] in any respect. Allan Holms
recent filings directly violate these restraints. The Form 5 and Schedule 13D
was an assertion of Allans role as a director and officer with authority to act
on behalf of the Company, and replacing both the board and management would clearly have an effect on our business operations.
A Nevada restraining order was
also issued on July 22, 2016 and also remains in place.
2
Allan Holms disclosures in this Form 5 and
Schedule 13D is directly at odds with an existing Nevada restraining order where
the Nevada court rules that
the 60,000,000 [voting] shares held by Eagle
Private Equity are the majority of voting shares of all BRI stock
and thus
renders the subject takeover attempt ineffectual.
The same Nevada court also ruled in the Companys
favor on June 27, 2016 concerning the Eagle
transaction.
3
After briefing, a day of argument, and
testimony from the Companys CFO, Dan Anderson, and
Eagles principal, Carl George, the Nevada court issued
a preliminary injunction in favor of the Company. Based
on part upon finding Mr. Andersons and Mr. Georges
testimony credible and persuasive, the court found
that the Eagle transaction was in the best interests of
the Company under the presumptions set forth in
Nevadas business judgment rule. The Nevada court, in
so granting the Companys preliminary injunction,
dissolved an earlier temporary restraining order that it
had granted in favor of Val Holms in the same case.