ECPN El Capitan Precious Metals Inc (CE)

Item 8.01            Other Events.

We are a party to an agreement with HKM Minerals (“HKM”) dated December 6, 2016 that governed our use of a pilot plant in Phoenix, Arizona that is owned by HKM and was used for the production and concentration of our mineralized materials.  HKN is an entity wholly owned by David Davidson, who has also been our contract miner.  Under the agreement, HKM was required to establish the pilot plant, obtain and secure the pilot plant equipment and the manpower necessary to operate it.  The pilot plant, including the equipment, was owned by HKM.  We transported mineralized material to the pilot plant and HKM was responsible for processing and concentrating it.  Each party was responsible for its own costs in carrying out their duties and responsibilities under the agreement. The proceeds from the sale of precious metal concentrates generated at the pilot plant are to be shared equal after the parties recoup their respective expenses.

As contemplated by the agreement, we made advances to HKM from time to time to facilitate HKM’s activities and for site improvements, equipment and ancillary equipment required to attain the through put goal of management.  Such advances are to be repaid to us out of HKM’s proceeds from the sale of precious metal concentrates.

From December 6, 2016 (the date of our agreement with HKM) until September 30, 2017 (the end of our 2017 fiscal year), we issued a total of 9.5 million shares of common  stock (the “S-8 Shares”) to Mr. Davidson in his individual capacity, and considered those issuances to be in lieu of cash advances to HKM.  The shares were issued from the Company’s 2015 Equity Incentive Plan, as amended, and their issuance was registered pursuant to one or more registration statements of the Company on Form S-8 (“Form S-8”) under the Securities Act of 1933, as amended (the “Securities Act”).

In connection with its audit of our consolidated financial statements for the fiscal year ended September 30, 2017, MaloneBailey, LLP, our independent certified public accounting firm, requested that we obtain a legal opinion stating that the use of Form S-8 to register the issuance of the S-8 Shares under the circumstances described above was in compliance with federal securities laws.  We were unable to obtain such a legal opinion without undue effort or expense based on the fact-intensive nature of the issues involved, and in light of our current financial condition.  MaloneBailey subsequently resigned as a result of this audit scope limitation and due to the resignation, did not conduct further investigation.

  

We believe that our use of Registration Statement on Form S-8 to register the issuance of the S-8 Shares was in compliance with applicable federal securities laws, as the S-8 Shares were issued to an individual (Mr. Davidson) providing bona fide services to us other than in connection with the offer and sale of securities in a capital raising transaction.  However, securities regulators or a purchaser in any resale of the S-8 Shares could claim that the issuance of the S-8 Shares was not properly registered on Form S-8, and that the issuance of such shares violated the registration requirements of Section 5 of the Securities Act.  In that situation, such purchasers (if any) may have the right under federal securities laws to rescind their purchases for a period of one year from the date of the violation.  Purchasers may also be entitled to additional remedies under state securities laws, which remedies and statutes of limitations vary and depend upon the state in which purchases occurred.

Caution Regarding Forward-Looking Statements

This Form 8-K Current Report includes information that constitutes forward-looking statements. Forward-looking statements often address our expected future business and financial performance, and often contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” or “will.” By their nature, forward-looking statements address matters that are subject to risks and uncertainties. Any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements.  Examples of such forward-looking statements include, but are not limited to,  the potential for claims related to our issuance of the S-8 Shares. Factors that could cause or contribute to such differences include: the reasons giving rise to MalonBailey’s resignation; MaloneBailey identifying disagreements or additional reportable events in a letter addressed to the SEC pursuant to Item 304 of Regulation S-K; the impact of the resignation of the Company’s independent registered public accounting firm on our ability to raise capital to fund continuing operations. Actual events or results may differ materially from the Company’s expectations.  Our forward-looking statements are presented as of the date hereof. Except as required by law, we expressly disclaim any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.