Annual report pursuant to Section 13 and 15(d)

EQUITY

v3.8.0.1
EQUITY
12 Months Ended
Dec. 31, 2017
Stockholders' Equity Note [Abstract]  
EQUITY

NOTE 7. EQUITY

 

Preferred Stock – 1,000,000 shares authorized.

 

Effective April 11, 2017, the Company initiated a $2,000,000 Series A Convertible Preferred Stock (“Preferred Stock”) offering at a price of $10.00 per share. The holders of Series A Preferred Stock are entitled to receive cumulative dividends at a rate of 9%. The Preferred Stock will automatically convert into common stock when the Company’s common stock market price equals or exceeds $0.28 per share for 30 consecutive days. At conversion, the value of each dollar of preferred share will convert to 7.1429 common shares (which results in a $0.14 per common share conversion rate). During the second quarter of 2017, 120,590 shares or $1,205,900 of the offering had been issued. The 120,590 shares were issued as follows: conversion of TORRI (40,500 shares) – See Note 7 for additional details, conversion of debt (28,900 shares - 25,900 related to short term notes [as described in Note 6] and 3,000 related to equipment purchase), conversion of shareholder advances (27,090 shares of which 840 was for accrued interest, see Note 7 for further explanation) and cash (24,100 shares). Of the 120,590 shares, 57,990 of the shares were issued to related parties while 62,600 of the shares were issued to third parties.

 

On July 6, 2017, Mr. Rick Wilber agreed to convert his cumulative outstanding debt of $550,000 into 55,000 shares of Preferred Stock. The outstanding debt included the following: a $350,000 Convertible Secured Note dated June 17, 2013, a $100,000 Convertible Secured Note dated September 30, 2013 and a $100,000 Convertible Secured Note dated December 31, 2013. Subsequent to this conversion, all of the Company’s debt with Mr. Wilber is deemed cancelled and it is no longer due and payable. Mr. Wilber retains both the warrants and shares that were previously issued by the Company related to the original sale of these notes (and their respective amendments).

 

On July 19, 2017, Jovian Petroleum Corporation (“Jovian”) converted $2 million of its remaining debt into 12,749,285 shares of the Company’s common stock and 21,510 shares of the Company’s Preferred Stock. The Preferred Stock was priced at $10.00 per share with a value of $215,100. Refer to Note 6 for further explanation. The CEO of Jovian is Quinten Beasley, our director, and the largest shareholder of Jovian is Zel C. Khan, our CEO and director.

 

On the 1st quarter 2017, James Burns received warrants to purchase 120,000 common shares, at an exercise price of $0.14 per share at a 3 year term, valued at $15,800, for his consulting services.

  

Common Stock

 

On May 1, 2015, the Company commenced a private offering of its securities under Regulation D to accredited investors. Each unit with a price of $10,000 per unit, is comprised of 100,000 shares of common stock and one warrant to purchase an additional 100,000 shares of common stock at a price of $0.12 per share at any time prior to August 5, 2018. As of December 31, 2015, fourteen (14) units had been subscribed for and 1,400,000 shares of common stock had been purchased by various accredited investors. See Note 6 for financial related details on all purchases.

 

On September 1, 2015, the Company commenced a private offering of its securities under Regulation D to accredited investors. Each unit which has a price of $6,000, is comprised of 100,000 shares of common stock and one warrant to purchase an additional 100,000 shares of common stock at a price of $0.10 per share at any time prior to August 31, 2018. As of December 31, 2015 twenty seven (27) units had been subscribed for and 2,700,000 shares of common stock had been purchased. Seven (7) of those units were purchased by accredited investors. This offering was closed on May 31, 2016. 

 

On September 23, 2015, the Company acquired a 10% working interest from Jovian in the SUDS field, in exchange for 10,586,805 shares of restricted common stock. For further details see Note 9.

 

On September 24, 2015, the Board of Directors of the Company approved the adoption of the 2015 Stock Incentive Plan (the “Plan”). The Plan provides an opportunity, subject to approval of our Board of Directors of individual grants and awards, for any employee, officer, director or consultant of the Company. The maximum aggregate number of shares of common stock which may be issued pursuant to awards under the Plan was 4,000,000 shares (which has since been increased to 40,000,000 as discussed below). The plan was ratified by the stockholders at the Company’s annual meeting which was held on April 14, 2016.

 

At the 2015 Annual Meeting of our Stockholders, held on April 14, 2016, the shareholders voted to increase the total number of authorized shares of common stock to 150,000,000.

 

On November 4, 2015, the Company acquired a 15% net working interest in the TLSAU field and all operating equipment on the field, pursuant to the terms of a Memorandum of Agreement between the Company and BSNM, which was dated November 4, 2015 (the “Purchase Agreement”).

 

On February 1, 2016, the Company acquired 100% of the issued and outstanding shares in Askarii Resources, LLC, a private Texas based oil & gas service company for 1,000,000 shares of Company common stock. See Note 9 for further details on this transaction.

 

On March 11, 2016, the Board of Directors granted three (3) contract employees 700,000 shares of the Company’s restricted common stock for settlement of outstanding payables. The shares were issued at the current market price of $0.06 per share on March 11, 2016, at an aggregate value of $42,000.

 

On August 17, 2016 the Board of Directors issued two employees 200,000 shares of the Company’s restricted common stock.  The shares were issued at current market price of $0.077 per share on August 17, 2016 at a value of $15,400 and recorded as stock based compensation.

 

On September 1, 2016, the Company acquired an additional 25% working interest ownership of TLSAU field through the issuance of 3,500,000 shares of its restricted common stock with an unrelated party. See Note 9 for additional details on this transaction.

 

On September 28, 2016, the Company issued 24,308,985 shares of its restricted common stock to Jovian to acquire an additional 40% working interest ownership of SUDS. See Note 9 for further details of this transaction.

 

On September 30, 2016, per a consulting agreement, a contractor was issued 11,607 shares of common stock in exchange for services. These shares were valued at $1,625 at a market price of $0.14 per share.

 

Effective September 30, 2016, the seven (7) Advisory Board members were compensated for their service from April 1, 2016 through September 30, 2016 (for two quarters) though the granting of 12,500 warrants each (87,500 total warrants per quarter), per quarter per Board member, to purchase 12,500 shares of the Company’s common stock at an average exercise price of $0.095 per share, which vested immediately, and are exercisable for 36 months thereafter. In 2016, a total of 262,000 warrants were issued with a fair value of $29,161 based on an average $0.095 valuation, volatility of 235%, a discount rate of 1.09% and a 3 year term. The total amount of the warrants was expensed in 2016. These warrants are subject to a clawback provision which would be ratably invoked if an advisory board member did not complete his 2016 service term.

 

On December 7, 2016, the Board of Directors issued an employee 100,000 shares of the Company’s restricted common stock.  The shares were issued at current market price of $0.12 per share on the effective date of November 17, 2016 at a value of $12,000 and recorded as stock based compensation.

 

During December 2016, warrants to purchase 100,000 shares of common stock were issued for short term debt. The loans were provided by accredited investors. These warrants had a valuation of $14,870 with an exercise price of $0.12 per share and expire in December 2019. 

 

On December 31, 2016, a contractor was granted warrants to purchase 40,000 shares of common stock with an exercise price of $0.14 per share. These warrants were valued at $5,545 at a market price of $0.16 per share.

 

On December 31, 2016, per the consulting agreement, a contractor was issued 18,157 shares of common stock in exchange for services. These shares were valued at $2,869 at a market price of $0.16 per share.

 

Effective March 31, 2017, the seven (7) Advisory Board members were compensated for their service from January 1, 2017 through March 31, 2017 by the granting of warrants to purchase 12,500 shares of common stock each per quarter per Board member (in aggregate 87,500 total warrants per quarter), at an average exercise price of $0.14 per share, which vested immediately, and are exercisable for 36 months thereafter. The warrants were issued with a fair value of $12,127 based on an average $0.14 valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term. The warrants were valued using the Black Sholes valuation model. These warrants are subject to a clawback provision which would be ratably invoked if an advisory board member did not complete his 2017 service term. Effective March 31, 2017, the Advisory Board was dissolved and no other warrants were issued subsequent to the first quarter of 2017.

 

Effective February 1, 2017, the Company entered into a consulting agreement in exchange for geology related services. Specifically these services include providing reports detailing analysis of present and potential oil and gas assets. The term of the agreement is one (1) year, subject to a one (1) year extension. The consultant is to be granted warrants to purchase 25,000 shares of common stock for services provided each quarter. The exercise price of the warrants will be the market price of the Company’s stock at quarter end, the warrant term expires 3 years from the date of grant. During the first quarter of 2017, 25,000 warrants were issued with a fair value of $3,465, based on an average $0.14 valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term. During the second quarter of 2017, 25,000 warrants were issued with a fair value of $2,217 based on an average $0.09 valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term. The warrants vested immediately. As of December 31, 2017, the consultant has been granted warrants to purchase 50,000 shares of common stock, with a fair value of $5,682. 

 

From January to March 2017, James Burns received 120,000 warrants of common shares, at the exercise price of $0.14 for a 3 year term, valued at $15,800, for his consulting services.

 

On May 12, 2017, one (1) warrant holder exercised a total of 600,000 warrants by remitting payment of $48,000 at a share price of $0.08 per shares.

 

On July 6, 2017, the Company contracted with an attorney to facilitate the conversion of the Rick Wilber debt (described above). To compensate the attorney for his service, he was granted 150,000 shares of common stock valued at $15,000.

 

On July 31, 2017, based on the terms of the agreement, the Company’s final outstanding $25,000 Convertible Bridge Note was mandatorily converted to 271,096 shares of common stock. Based on the agreement, the debt was converted at $0.10 per share. This included the principal balance of $25,000 and accrued interest of $2,110. However, the market price of the shares on the conversion date was $0.12 per share resulting in a loss on conversion of $5,422.

 

On August 15, 2017, in exchange for services related to negotiations concerning our New Mexico operating bond requirements, the Company paid a law firm 500,000 shares of common stock was valued at $65,000. Such shares were provided as a bonus for the successful closing of the Twin Lakes San Andres Unit, New Mexico acquisition.

 

From October to December 2017, the Company issued a total of 750,000 shares of common stock for consulting services valued at $78,000. Out of the 750,000 shares: 294,000 shares were issued to Sandstone Group Corp; 243,000 shares were issued to Newbridge Securities Corp; 63,000 shares were issued to Robert Santos Nesperiera; and 150,000 shares were issued to Interlink Group Inc.

 

On October 1, 2017, the Company commenced a private offering of its securities under Regulation D to accredited investors. Each unit which has a price of $50,000, is comprised of 416,667 shares of common stock and one warrant to purchase an additional 416,667 shares of common stock at a price of $0.20 per share at any time prior to October 1, 2020. As of December 31, 2017 six and a half (6.5) units had been subscribed for and 2,708,336 shares of common stock had been purchased by various accredited investors for $325,000. The proceeds from this private offering include units sold to related parties, as described in Note 5.

 

On November 07, 2017, the majority stockholders of the Company, via written consent to action without meeting, approved (1) the adoption of an amendment to the Petrolia Energy Corporation 2015 Stock Incentive Plan to increase by 36,000,000 (to 40,000,000) the number of shares of common stock reserved for issuance under the plan; (2) the filing of a Certificate of Amendment to the Company’s Certificate of Formation with the Secretary of State of Texas to (a) increase the number of authorized shares of common stock, par value $0.001 per share of the Company, to 400,000,000 shares of common stock; and (b) amend the par value of the Company’s preferred stock, from $0.10 per share to $0.001 per share.

 

 

Summary information regarding common stock warrants issued and outstanding as of December 31, 2017, is as follows:

 

      Warrants    

Weighted Average 

Exercise Price 

   

Aggregate 

intrinsic value 

    Weighted average remaining contractual life (years)  
Outstanding at year ended December 31, 2015       11,910,111     $ 0.33     $       3.5  
Granted       5,740,416       0.09             2.6  
Exercised       (825,000 )                    
Expired                            
Outstanding at year ended December 31, 2016       16,825,527       0.26             3.20  
Granted       19,896,670       0.19             3.01  
Exercised       (1,635,000 )     0.07              
Expired                          
Outstanding at quarter ended December 31, 2017       35,087,197     $ 0.24     $ 1,106,583       2.15  

 

The table below summarizes warrant issuances during the years ended December 31, 2017 and 2016:

 

   

Year Ended 

December 31, 

 
    2017     2016  
Warrants Granted                
 Board of Director Service     3,120,000       2,500,000  
 PORRI           150,000  
 Deferred Salary – CEO, CFO     134,167       206,666  
 Performance bonus – President     666,667        
 Providing Bond Related Collateral     2,250,000       31,250  
 Conversion of Debt     10,400,000          
 Pre-bridge Loans           290,000  
 Short-term Debt           100,000  
 Advisory Board     87,500       262,500  
 Deferred loan penalty           10,000  
 Consulting Agreements     50,000       340,000  
 Rick Wilber Loan     480,000       500,000  
 Signing Bonus – CEO, CFO           550,000  
 Private Placement Memo (Sept 2015)           800,000  
 Private Placement Memo (Oct 2017)     2,708,336        
 Total     19,896,670       7,740,000