PROJECTS
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USE OF PROCEEDS
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TLSAU Development Plan (Phase 1)
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$
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500,000.00
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SUDS Development Plan (Phase II)
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$
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500,000.00
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Noack Development Plan (Phase I)
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$
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100,000.00
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Working Capital and Offering fees
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$
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900,000.00
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Issuer:
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Petrolia Energy Corporation., a Texas corporation (the “Company”) having an address of 710 N Post Oak Road, Suite 512, Houston, Texas 77024.
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Amount of Financing:
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$2,000,000.00 (two million dollars) unless increased by the Company in its discretion, without notice to prior investors.
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Proposed Offering:
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The Series A Preferred Stock will be sold in a private placement exempt from registration pursuant to Section 4(a)(2) and/or Rule 506 of the Securities Act of 1933, as amended (the “Securities Act”), to only ‘accredited investors’ as such term is defined in the Securities Act.
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Type of Securities:
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Shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), initially convertible into shares of common stock of the Company (“Common Stock”) on a 71.428571-for-one basis (i.e., the equivalent number of shares as would be due, based on the Original Purchase Price, if converted into common stock based on the market value of the Company’s common stock on April 11, 2017, which trading value was $0.14 per share).
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Price Per Share:
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$10.00 (ten dollars) (the “Original Purchase Price”).
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Resulting Capitalization:
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Existing Outstanding Common Stock
Warrant Pool
Series A Preferred Stock (after conversion)
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Total Fully Diluted Common Stock Post-Offering
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79,034,505
17,035,527
14,285,714
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110,355,746
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71.6%
15.4%
13.0%
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100.0
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%
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Eligible Investors:
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Accredited investors located in New York, Texas, California and Oklahoma.
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Dividends:
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The holders of Series A Preferred Stock shall be entitled to receive non-cumulative dividends in preference to any dividend paid on the Common Stock at the rate of 9% of the Series A Preferred Stock Original Purchase Price per annum, paid in cash on a semi-annual basis. The Series A Preferred Stock will also participate pro-rata, on an as-converted basis, in cash dividends paid on the Common Stock.
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Liquidation Preference:
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In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Stock shall be entitled to receive, in preference to the holders of Common Stock, an amount equal to the Original Purchase Price, together with any declared but unpaid dividends.
The remaining assets will be distributed ratably among the holders of Common Stock.
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Optional Conversion:
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The holders of the Series A Preferred Stock shall have the right to convert the Series A Preferred Stock and accrued dividends thereon, at the option of the holder, at any time, into shares of Common Stock of the Company.
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Automatic Conversion:
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The Series A Preferred Stock and all accrued and unpaid dividends thereon shall be automatically converted into Common Stock, at the then applicable conversion price, upon the earliest to occur of (i) the holders of a majority of the Series A Preferred Stock then outstanding consenting to such conversion; (ii) the closing of a registered public offering of the Company’s Common Stock, but only if the price per share is at least $0.30 (subject to anti-dilution, recapitalization, and reorganization adjustments) and the gross proceeds of the offering to the Company equal or exceed $10 million (a “Qualified Public Offering”); (iii) the five year anniversary of the closing date; or (iv) the average closing price per share of the Company’s Common Stock as reported on a national securities exchange, NASDAQ, the OTCQX, the OTCQB, the OTCQX or the OTC Pink market, equals or exceeds $0.28 per share (as adjusted for any recapitalizations) during any period of thirty (30) consecutive trading days.
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Anti-Dilution Protection:
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The conversion price of the Series A Preferred Stock will be subject to proportional adjustment for stock splits, stock dividends, recapitalizations, and the like.
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Voting Rights:
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The Series A Preferred Stock will vote together with the Common Stock and not as a separate class except as specifically provided herein under “Protective Provisions” or as otherwise required by law. Each share of Series A Preferred Stock shall have a number of votes equal to the number of shares of Common Stock then issuable upon the conversion of such share of Series A Preferred Stock, subject to the Beneficial Ownership Limitation described below.
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Protective Provisions:
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As long as at least 20% of the original shares of the Series A Preferred Stock issued remain outstanding, consent of the holders of a majority of the Series A Preferred Stock then outstanding shall be required for any action which (i) increases or decreases the authorized number of shares of Series A Preferred Stock; or (ii) creates (by reclassification or otherwise) any new series or shares of capital stock having rights, preferences, or privileges senior to or on a parity with the Series A Preferred Stock.
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Piggyback Registration Rights:
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The Company covenants and agrees that if, at any time prior to the Registration Rights Expiration Date (defined below), it proposes to file a registration statement with respect to any class of equity or equity-related securities (other than in connection with an offering to the Company’s employees or in connection with an acquisition, merger or similar transaction) under the Securities Act in a primary registration on behalf of the Company and/or in a secondary registration on behalf of holders of such securities, and the registration form to be used may be used for the issuance or resale of the shares of common stock issuable upon conversion of the Series A Preferred Stock (collectively, the “Registrable Securities”), the Company will either include the Registrable Securities in such registration statement or give prompt written notice to the holders of its intention to file such registration statement and will offer to include in such registration statement, such number of Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) days after the giving of notice by the Company (the “Piggyback Registration Rights”). The holders shall also be required to provide the Company customary and reasonable representations and confirmations regarding the Registrable Securities held by the holders, information relating to the beneficial ownership of other securities of the Company held by such holders, information regarding the persons with voting and dispositive control over the holder and such other information as the Company or its legal counsel may reasonably request. The Company shall not be required to include Registrable Securities in a registration statement relating solely to an offering by the Company of securities for its own account if the managing underwriter or placement agent shall have advised the Company in writing that the inclusion of such securities will have a material adverse effect upon the ability of the Company to sell securities for its own account, and provided further that the holders are not treated less favorably than others seeking to have their securities included in such registration statement. Notwithstanding the obligations set forth above, if any Securities and Exchange Commission guidance sets forth a limitation on the number of securities permitted to be registered on a particular registration statement as a secondary offering, the number of Registrable Securities to be registered on such registration statement will be reduced pro rata between the holders (or other parties) whose securities are included in such registration statement. The “Registration Rights Expiration Date” is the earlier of (a) two years from the closing date; and (b) the date that the investors are eligible to sell the Registrable Securities under Rule 144.
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Ownership Limitation:
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The Series A Preferred Stock will contain a blocker prohibiting the conversion of the Series A Preferred Stock into Common Stock of the Company, if upon such conversion/exercise the holder thereof would beneficially own more than 4.99% of the Company’s then outstanding Common Stock, provided such limitation shall not apply in the event of an automatic conversion of the Series A Preferred Stock (the “Beneficial Ownership Limitation”). The Beneficial Ownership Limitation shall also limit the voting rights of any holders of the Series A Preferred Stock. The Beneficial Ownership Limitation may be waived by any holder with 61 days prior written notice to the Company.
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Recapitalizations:
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If at any time while the Series A Preferred Stock is outstanding, there shall occur any capital reorganization, recapitalization, reclassification, share exchange, restructuring, consolidation, combination or merger (subject to certain standard exceptions) involving the Company in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for shares of stock or other securities or property (including cash) of the Company or otherwise, a provision shall be made so that each Series A Preferred Stock holder will be entitled to receive upon conversion of the shares of Series A Preferred Stock held by such holder the kind and number of shares of stock or other securities or property (including cash or any combination thereof) of the Company or otherwise, to which a holder holding the number of shares of Common Stock into which the shares of Series A Preferred Stock held by such Series A Preferred Stock holder are convertible immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled upon such event.
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Expenses:
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Irrespective of whether any closing or sale is effected, the Company and the investors shall each bear their own legal and other expenses with respect to the transaction.
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Other Provisions:
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The purchase agreement/subscription agreement shall include standard and customary representations and warranties of the Company and the investors, and the other agreements prepared to implement this financing shall contain other standard and customary provisions.
The Company reserves the right to terminate the offering at any time and to pay investment banking fees and other appropriate finder’s fees.
The Company reserves the right to issue additional Preferred stock to redeem existing indebtedness.
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