Quarterly report pursuant to Section 13 or 15(d)

EQUITY

v3.22.2
EQUITY
6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
EQUITY

NOTE 10. EQUITY

 

Preferred stock

 

The holders of Series A Preferred Stock are entitled to receive cumulative dividends at a rate of 9% per annum. 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 stock (based on a $10 per share price) will convert into 7.1429 common shares (which results in a $0.14 per common share conversion rate).

 

In accordance with the terms of the Preferred Stock, cumulative dividends of $89,568 were declared for the six months ended June 30, 2021, and $89,350 the six months ended June 30, 2020.

 

Common stock

 

As of the year ended December 31, 2019, the Company closed private placements for $0.08 per unit for a total of 1,875,000 units and gross proceeds of $150,000 (the “2019 Units”). Each 2019 Unit was comprised of one common share and two warrants entitling the holder to exercise such warrant for one common share for a period of two years from the date of issuance. The warrants have exercise price of $0.10 per share. See additional description of the detail transactions concerning those warrants in Note 11: Related Party Transactions, below.

 

On August 8, 2019, director Joel Martin Oppenheim exercised warrants to purchase 150,000 shares of common stock for cash proceeds of $15,000 at an exercise price of $0.10 per share. The shares were issued in January 2020.

 

On August 14, 2019, director Joel Martin Oppenheim exercised warrants to purchase 10,000 shares of common stock for cash proceeds of $1,000 at an exercise price of $0.10 per share. The shares were issued in January 2020.

 

On July 23, 2019, Joel Oppenheim, a related party, purchased 1 unit of the debt private placement with gross proceeds of $12,500. At maturity, the holder has the option to either collect the principal or convert the balance into shares/warrants. The conversion would be for 156,250 shares of common stock and warrants to purchase 312,500 shares of common stock at a price of $0.08 per unit. The warrants fair value was determined to be $15,517 via the Black Sholes Option Pricing Model. Consideration for the purchase was provided though a cash payment of $2,500 as well as the forgiving of an outstanding bridge loan of $10,000. The shares were issued in January 2020.

 

On January 20, 2020, Jovian Petroleum, a related party, purchased 1 unit of the debt private placement with gross proceeds of $12,500. At maturity, the holder has the option to either collect the principal or convert the balance into shares/warrants. The conversion would be for 156,250 shares of common stock and warrants to purchase 312,500 shares of common stock at a price of $0.08 per unit. Jovian Petroleum converted the debt into shares during 2020.

 

On February 29, 2020, the Company signed a consulting agreement with a third party to provide Management services related to the SUDS field. The compensation related terms included the issuance of 250,000 shares of Common Stock. The shares were not issued and earned until December 15, 2020.

 

On September 1, 2020, the Company entered into an agreement with Mark Allen, to serve as President for a period of six months (with monthly extensions). The President was to earn a fee of $15,000 a month (though the fees were rarely paid). Also, the President was issued a signing bonus of 2,000,000 shares of common stock. One million (1,000,000) shares were to be issued upon signing and the remaining 1,000,000 shares are to be issued at the completion of a 6-month probationary period. In addition, the President was granted warrants to purchase 1,000,000 shares of common stock exercisable at $0.08 per share equally vesting over 24 months. The warrants expire in 36 months.

 

On December 15, 2020, President Mark Allen exercised warrants to purchase 1,650,000 shares of common stock for cash proceeds of $69,375 at an average exercise price of $0.04 per share.

 

On December 22, 2020, prior CFO Tariq Chaudhary was issued 500,000 shares of common stock. These shares were issued in exchange for Mr. Chaudhary releasing the Company of his remaining deferred outstanding salary balance of $77,500. The shares were issued at an average conversion price of $0.15 per share.

 

On January 25, 2021, the Company signed an Executive Salary Payable Agreement with Zel Khan as the Chief Executive Officer. All of Mr. Khan’s previous salary obligation was satisfied by the issuance of 1,992,272 shares of the Company on January 25, 2021.

 

Joel Oppenheim, former Director, was issued 316,491 shares on January 25, 2021 pursuant to a Director’s Fees Payable Agreement. The agreement stated that the shares were issued in full satisfaction of all outstanding director fees payable.

 

Paul Deputy was reinstated Interim Chief Financial Officer and signed a Settlement and Mutual Release Agreement. In exchange for releasing the Company for any current, outstanding payroll and/or service-related liability on January 29, 2021, the Company agreed to pay Mr. Deputy $50,000, to be paid in $2,500 monthly increments, starting April 1, 2021. In addition, Mr. Deputy was issued 250,000 shares of Petrolia common stock on January 29, 2021. The shares were issued at the price on that date of $0.033. This created a gain of $134,270 that was recorded as additional paid in capital, due to the related party nature of the transaction.

 

 

On March 30, 2021, Mark Allen converted $30,000 of unpaid contract wages from early 2020 into 333,333 common shares of common stock. A conversion price of $0.09 per share was used to determine the number of shares.

 

On March 30, 2021, Mark Allen converted a defaulted secured loan of $135,000 as well as $135,000 of guaranteed return that was due on December 15, 2019. The conversion consisted of 5,400,000 shares of common stock and 5,400,000 warrants to purchase common stock. The warrants have a strike price of $0.08 per share and expire in 36 months.

 

More details on the transactions above can be found in Note 11. Related Party Transactions.

 

The common stock is currently not actively traded because of SEC Rule 15c2-11.

 

Warrants

 

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, as amended on November 7, 2017, was 40,000,000 shares. The plan was ratified by the stockholders of the Company on April 14, 2016.

 

Continuity of the Company’s common stock purchase warrants issued and outstanding is as follows:

 

    Warrants    

Weighted Average

Exercise Price

 
Outstanding at year ended December 31, 2019     57,043,837     $ 0.14  
Granted     18,650,000       0.15  
Exercised     (1,650,00 )     0.08  
Expired     (33,279,170 )     0.19  
Outstanding at December 31, 2020     40,764,667     $ 0.13  
Granted     7,400,000       0.09  
Expired     (12,214,667 )     0.11  
Outstanding at June 30, 2021     35,950,000     $ 0.12  

 

As of June 30, 2021, the weighted-average remaining contractual life of warrants outstanding was 1.53 years (December 31, 2020 – 1.39 years).

 

As of June 30, 2021, the intrinsic value of warrants outstanding is $0.00 (December 31, 2020 - $0.00).

 

The table below summarizes warrant issuances during the six months ended June 30, 2021, and year ended December 31, 2020:

 

    June 30, 2021     December 31, 2020  
Warrants granted:                
Board of Directors and Advisory Board service     1,500,000       5,250,000  
Pursuant to employment agreements           1,000,000  
Pursuant to financing arrangements     500,000       1,000,000  
Pursuant to consulting agreements           250,000  
Pursuant to loan agreements           11,150,000  
Pursuant to extinguishment of debt     5,400,000        
Total     7,400,000       18,650,000  

 

The warrants were valued using the Black Scholes Option Pricing Model with the range of assumptions outlined below. Expected life was determined based on historical data of the Company.

 

    June 30, 2021     December 31, 2020  
Risk-free interest rate     0.25% to 0.35 %     1.65% to 2.38 %
Expected life     2.0 to 3.0 years       1.0 to 3.0 years  
Expected dividend rate     0 %     0 %
Expected volatility     289% to 327 %     240% to 274 %