Item
2.01 Completion of Acquisition or Disposition of Assets.
Spin-Off
of Subsidiary – NexFuels, Inc.
NexFuels,
Inc. and the Carbon Dioxide Recovery Project
On
July 11, 2016, T-Rex Oil, Inc. (“the Company” of “T-Rex”) incorporated NexFuels, Inc. (“NexFuels”),
a wholly-owned subsidiary in the State of Colorado. NexFuels was created in order to develop the Company’s Carbon Dioxide
Recovery Project.
The
Company’s Carbon Dioxide Recovery Project (“the Project”) is focused on the development of exhaust stack supplies
of carbon dioxide for use in enhanced oil recovery. The project involves the development, build out and operation of a commercial
scale carbon capture systems on existing coal fueled electric power plants in the United States, specifically in Wyoming. Once
the carbon dioxide has been captured, purified and condensed it can be sold and deliver the CO2 to oil producers in the surrounding
areas through a company owned and operated CO2 pipeline. The Company intended to develop the program in concert with its oil production
activities in the Powder River Basin of Wyoming.
In
April 2016, the Company entered into a Confidentiality Agreement and a Memorandum of Understanding (“MOU”) with Rocky
Mountain Power, a division of PacifiCorp, which is owned by Berkshire Hathaway Energy. The Memorandum provides both parties the
opportunity for a period of 18 months to explore the feasibility of a Carbon Dioxide Capture Facility, exclusively.
On
September 12, 2016, the Company announced that it had received the first part of the Feasibility Analysis being prepared by Sargent
& Lundy, LLC regarding the future operation of a carbon capture system to be used to generate a CO2 stream in conjunction
with enhanced oil recovery pursuant to the MOU. Phase 1 which was a Regulatory and Permitting Study had been completed and it
was determined that the permitting and regulatory approvals were feasible. The next phase, the technical feasibility and economic
studies, has commenced and it is expected to be completed in October 2016.
As
work on the project has developed, the Company’s Board of Directors began to explore opportunities for the financing and
development of the Project, including the development of the carbon dioxide recovery project in a separate company able to develop
the project and able to obtain necessary financing without the further dilution of the shareholders of the Company. The financing
of the two segments is very different. The Project will require large amounts of financing that are accessed from capital markets
that include debt financing and equity financing.
The
Board of Directors saw the value in the Project, however, it was determined that in order to raise sufficient funds to implement
its commercialization, the Company would need to raise substantial amounts of money, which would dilute current shareholder interests
in T-Rex. Therefore, to focus and better implement these strategies, the Board of Directors approved the spin-off of NexFuels.
The
Company’s Board of Directors has determined that spinning-off of NexFuels and the carbon dioxide recovery project will accomplish
a number of important objectives. The spin-off will separate distinct lines of business with different financial, investment and
operating characteristics so that each can adopt business strategies and objectives tailored to their respective markets. This
will allow NexFuels and the carbon dioxide recovery project, which have operations that are distinct from the Company’s
oil exploration and production operations to better focus and prioritize the allocation of both companies’ management and
implement their financial resources for achievement of their corporate objectives.
The
Spin-Off
Record
shareholders of T-Rex, as of the Record Date of August 19, 2016, will receive one shares of NexFuels common stock for every two
shares (2) of T-Rex common stock owned. The stock dividend will be based upon 17,009,628 shares of T-Rex common stock that are
issued and outstanding as of the Record Date.
Record
shareholders of T-Rex will not automatically receive a paper certificate for shares of common stock. Only after NexFuels is registered
with the SEC as a reporting company, can the NexFuels transfer agent create an account for each T-Rex stockholder. On the effective
date of the distribution, the transfer agent will credit the restricted shares issued to each registered stockholder to their
respective accounts with the transfer agent.
NexFuels
Board of Directors
As
part of the spin-off of NexFuels, the Company’s Chief Executive Officer and Chairman, Mr. Donald Walford was appointed to
the Board of Directors of NexFuels, as was the Mr. Herbert Sears, who is also a member of the T-Rex Board of Directors. Mr. Thomas
Sweeney was also appointed to the Board of Directors.
Description
of Assets Held by NexFuels, Inc.
On
August 19, 2016, the Company assigned to NexFuels, Inc. the following assets:
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1.
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The
idea, concept and plan to capture and sell CO2 generated by the Dave Johnston power plant located in Converse County, Wyoming
and/or any other power plants owned by PacifiCorp.
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2.
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The
MOU by and between T-Rex and PacifiCorp Energy the owner/operator of the power plant.
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3.
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The
existing contract by and between Sargent Lundy LLC to perform the feasibility study.
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4.
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Any
and all other valid and subsisting contracts, agreement, and instruments, rights or other interest that the Company may have
in the Project.
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5.
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All
valid and subsisting easements, permits, licenses, servitudes, rights of way and other surface rights that directly relate
to or are otherwise directly applicable to the Project.
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At
the time of the assignment of the Project, the Company had incurred costs in connection with its development. These costs were
related primarily to management’s time and travel and payment to Sargent Lundy LLC for Phase 1 of the feasibility study.
None of these costs were accounted for as assets or capitalized.
The
spin-off of NexFuels is not expected to have an impact upon T-Rex’s balance sheet, since the Project had no tangible or
intangible assets, which had been capitalized and the financial statements of NexFuels on a stand-alone basis would therefore
not meet the 10% significance test of Instruction 4(ii) Item 2.01 of Form 8-K and 11-01(b)(2) of Regulation S-X, as such financial
information has not been provided.