Item 1.03 Bankruptcy or Receivership
As previously reported, on April 15, 2020, the Company and three of its
subsidiaries Yuma Exploration and Production Company, Inc., Davis Petroleum
Corp., and The Yuma Companies, Inc. (collectively, the Company and the filing
subsidiaries, the "Debtors"), filed voluntary Chapter 11 petitions for relief
under the United States Bankruptcy Code in the U.S. Bankruptcy Court for the
Northern District of Texas (the "Bankruptcy Court"). The Chapter 11 Proceeding
is being administered under the caption and case number: In re Yuma Energy, Inc.
Case No. 20-41455-11.
Conversion to Chapter 7
On October 20, Yuma Energy, Inc., together with its subsidiaries Yuma
Exploration and Production Company, Inc., Davis Petroleum Corp., and The Yuma
Companies, Inc. (collectively, the Company and the filing subsidiaries, the
"Debtors"), announced that its voluntary Chapter 11 petition for relief under
the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Northern
District of Texas (the "Bankruptcy Court"), filed on April 15, 2020, has been
converted to a Chapter 7 liquidation.
The Debtors intended to use the Chapter 11 process to implement the orderly
liquidation of their assets in an effort to maximize values and recoveries for
all stakeholders and subsequently obtained court approval to conduct an auction
for all of their assets, which primarily consist of operating and non-operating
interests in several properties located in Louisiana, Texas, Wyoming and
Oklahoma (the "Properties").
Unfortunately, as a result of the severe downturn in commodity prices, multiple
operating issues affecting production and operating costs, the inability of
Debtors to conduct remedial well operations to maintain cash flows, general
industry conditions and other factors, bids received for the Properties were
minimal and the auction was canceled. Additionally, the secured creditor, YE
Investment, LLC ("YEI") an affiliate of Red Mountain Capital Partners LLC and
the Unsecured Creditors Committee ("UCC") were unable to resolve
disputes. Subsequently, with the concurrence of YEI and the UCC, the Company
engaged in discussions with a potential acquiror in an attempt to reorganize
through a business sale. The potential acquiror terminated these discussions on
October 13, 2020. Having no further viable options, the Bankruptcy Court issued
an order approving the conversion of the Chapter 11 cases of the Debtors to
Chapter 7 liquidations on October 19, 2020 Concurrent with the appointment of a
Chapter 7 Trustee, Mr. Anthony C. Schnur (Yuma's Chief Restructuring Officer)
and the Company's Directors will no longer control the Debtors, including any
operation of the Debtors, the liquidation of assets, and the resolution of
liabilities.
Please refer to our prior press releases and filings with the Securities and
Exchange Commission for additional information related to the Company. In
addition, copies of all documents filed in this case can be accessed at no
charge through Stretto, the Debtors' claims & noticing agent (at
https://cases.stretto.com/yumaenergy). For questions, Stretto can be contacted
by email at TeamYumaEnergy@stretto.com or toll-free at 855-303-9310. Stretto
cannot give legal or financial advice.
Going Concern
Due to the difficult financial circumstances, the Company has been unable to
file an annual report on Form 10-K as of and for the year ended December 31,
2019 or its quarterly reports on Form 10-Q as of and for the quarters ended
March 31, 2020 and June 30, 2020. The Company's audited consolidated financial
statements for the year ended December 31, 2018 included a going concern
qualification. The risk factors and uncertainties described in the Company's SEC
filings for the year ended December 31, 2018 and subsequent quarters raised
substantial doubt about the Company's ability to continue as a going concern. In
connection with the Chapter 7 proceedings, the Company will no longer operate as
a going concern.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
The following exhibits are included with this Current Report on Form 8-K.
Exhibit No. Description
99.1 Press Release dated October 20, 2020 - Chapter 11 Bankruptcy
Proceedings Converted to Chapter 7 Liquidation
© Edgar Online, source Glimpses