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NOTE 4. EQUITY
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 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.
Common Stock
During the nine-month period ended September 30,2014, the Company sold 2,600,111 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. The purchasers also included Leo Womack, who after his investment on August 15, 2014 simultaneously joined our Board of Directors. 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 June 30, 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 $599,556 of general and administrative expense during the nine-month period ended September 30, 2014. In addition, the Company granted 100,000 shares of common stock to a director during the quarter ended September 30, 2014, which were valued, using the closing stock price on the date of grant, at $23,000.
Additionally 225,000 shares related to stock compensation for employees and directors vested during the nine-month period ended September 30, 2014. Stock based compensation expense relating to these shares was $50,079 and $12,427 for the nine-month periods ended September 30, 2014 and 2013, respectively.
On September 30, 2014, Marc Spezialy resigned as officer and director of the company and transferred 1,000,000 shares of the Company’s common stock, to the Company for no consideration. These shares were returned to treasury and cancelled. Additionally Mr. Spezialy was able to purchase a company vehicle by paying off the amount owed of $33,250. This transfer resulted in a loss of $11,258 for the third quarter of 2014.
As of September 30, 2014, we had $334,333 of total unrecognized compensation expense associated with restricted shares granted to employees and a director. Of that amount, $253,333 (666,667 unvested shares) will be recognized over a fourteen month period.
The remainder is subject to performance conditions and is not currently being amortized. As of September 30, 2014, there were 300,000 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 September 30, 2014, is as follows:
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