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NOTE 4. EQUITY
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Jun. 30, 2014
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note Disclosure [Text Block] |
NOTE 4. EQUITY
Preferred Stock – 1,000,000 shares authorized, none issued or outstanding.
During the six-month period ended June 30,2014, the Company sold 2,300,044 shares to private investors as part of the private placement detailed in the 8-K filed on February 14, 2014. The shares were all purchased at a price of $0.30 per share and include warrants to purchase additional shares (one-for-one) at $0.75 per share any time before August 5, 2019. The purchasers included David Baker, who after his investment on February 16, 2014 subsequently joined our Board of Directors on May 8, 2014 and became the Company’s Chief Executive Officer on June 2, 2014. On May 28, 2014 the Company entered into a financing services agreement (“Service Agreement”) with ViewTrade Securities
Corporation (“ViewTrade”). The Company will pay a commission in an amount equal to 10% of the gross proceeds received from any purchaser of Units directly introduced to the Company by ViewTrade, together with a five-year warrant to purchase up to 10% of the Securities sold by ViewTrade at an exercise price of 110% of the Offering Price. The Service Agreement resulted in $2,500 of commission expense and 8,333 warrants issued at a strike price of $0.33 in the second quarter of 2014. As of the end of the second quarter of 2014 the Service Agreement has been terminated. The Company evaluated the warrants for derivative accounting consideration under ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s own stock. We concluded that the warrants meet the criteria for classification in stockholders' equity. Therefore, derivative accounting is not
applicable for the warrants.
As reported on Form 8-K filed January 31, 2014, on January 27, 2014, 800,000 shares were granted to David Baker in the first quarter of 2014 as consideration for his services as a consultant. The consulting agreement can be found in the 8-K filed on January 27, 2014. The shares granted to David Baker resulted in $380,000 of general and administrative expense in the first quarter of 2014. On June 2, 2014 we issued 50,000 shares to an analyst for one year of service to research surrounding production near future oil and gas properties the Company is evaluating. The shares granted resulted in $19,000 of general and administrative expense in the second quarter of 2014.
As reported on Form 8-K filed June 4, 2014, on June 2, 2014, David Baker and Marc Spezialy entered into employment agreements with the Company. In addition to a base salary and in consideration for both Mr. Baker’s and Mr. Spezialy’s future services as officers and directors, each received restricted shares of the Company’s common stock according to the terms of their respective employment agreements which can be found in the 8-K filed on June 4, 2014. Mr. Baker received a one-time grant of 800,000 restricted shares of the Company’s common stock effective June 1, 2014 for his service as Chief Executive Officer. The shares shall be forfeited should the employment agreement be terminated for any reason prior to the conclusion of the initial 18 month term at a rate equal to 44,445 of the shares for each whole month that the employment period is terminated prior to the
conclusion of the initial 18 month term. The Company is accounting for the expense of these shares over the term of Mr. Baker’s employment. Mr. Baker also received a separate grant of an additional 100,000 restricted shares of the Company’s common stock for his services as a Director effective June 1, 2014. These shares are not subject to potential forfeiture. Mr. Spezialy received a one-time grant of 1,000,000 restricted shares of the Company’s common stock, effective June 1, 2014 for his service as Chief Operating Officer. Mr. Spezialy also received a separate grant of an additional 100,000 restricted shares of the Company’s common stock for his services as a Director, effective June 1, 2014. Matthew Ferguson received a grant of 100,000 restricted shares of the Company’s common stock as compensation for his services as a Director and a separate grant of an additional 100,000 restricted
shares of the Company’s stock for his services as a board advisor. Both grants are effective June 1, 2014. The shares granted to our employees and directors in the second quarter of 2014 resulted in $548,889 of general and administrative expense for the same period.
Additionally 150,000 shares related to stock compensation for employees and directors vested during the six-month period ended June 30, 2014. Stock based compensation expense relating to these shares was $40,241 and $0 for the six-month periods ended June 30, 2014 and 2013, respectively.
As of June 30, 2014, we had $458,949 of total unrecognized compensation expense associated with restricted shares granted to employees and director. Of that amount, $296,949 (830,556 unvested shares) will be recognized over a seventeen month period.
The remainder is subject to performance conditions and is not currently being amortized. As of June 30, 2014, there were 600,000 unvested shares subject to performance conditions. All of the aforementioned shares had a grant-date fair value, as determined by closing stock prices on August 5, 2013, of $0.27 per share.
Summary information regarding common stock warrants issued and outstanding as of June 30, 2014, is as follows:
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