Quarterly report pursuant to Section 13 or 15(d)

EQUITY

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EQUITY
6 Months Ended
Jun. 30, 2022
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 $89,595 were declared for the six months ended June 30, 2022, and $89,568 the six months ended June 30, 2021.

 

The holders of Series B Preferred Stock do not accrue dividends and have no conversion rights. For so long as any shares of Series B Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, have the right to vote on all shareholder matters (including, but not limited to at every meeting of the stockholders of the Company and upon any action taken by stockholders of the Company with or without a meeting) equal to sixty percent (60%) of the total vote. No shares of Series B Preferred Stock held by any person who is not then a member of Board of Directors of the Company shall have any voting rights.

 

The holders of Series C Preferred Stock are entitled to receive cumulative dividends at a rate of 8% per annum. If any shares of Series C Preferred Stock remain outstanding as of December 31, 2023, the dividend rate will increase to 11% per annum. The Series C Preferred Stock will automatically convert into common stock upon any registered public offering of the Company’s common stock. At conversion, the value of each dollar of Series C Preferred Stock (based on a $10 per share price) will convert into 100 common shares (which results in a $0.01 per common share conversion rate).

 

In accordance with the terms of the Series C Preferred Stock, cumulative dividends of $4,260 and $0 were declared for the six months ended June 30, 2022, and June 30, 2021, respectively.

 

 

Common stock

 

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 and $9,888 of accrued interest 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 of Petrolia Energy Corporation is currently not traded. On September 27, 2022, the Financial Industry Regulatory Authority (“FINRA”) pulled the Company’s stock symbol due to inactivity in the Company’s security for a year. The Company is taking steps to become current in its filings with the Securities and Exchange Commission and upon becoming current in its filings with the Securities and Exchange Commission, it plans to engage a market maker to file a Form 15c2-11 with FINRA and obtain a stock symbol.

 

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, 2020     40,764,666     $ 0.13  
Granted     9,400,000       0.09  
Expired     (20,464,666 )     0.11  
Outstanding at December 31, 2021     29,700,000     $ 0.13  
Granted     500,000       0.10  
Expired     (4,480,000 )     0.11  
Outstanding at June 30, 2022     25,720,000     $ 0.13  

 

As of June 30, 2022, the weighted-average remaining contractual life of warrants outstanding was 1.15 years (December 31, 2021 – 1.71 years).

 

As of June 30, 2022, the intrinsic value of warrants outstanding is $0.00 (December 31, 2021 - $0.00).

 

 

The table below summarizes warrant issuances during the six months ended June 30, 2022, and year ended December 31, 2021:

 

    June 30, 2022     December 31, 2021  
Warrants granted:                
Board of Directors and Advisory Board service           3,000,000  
Pursuant to financing arrangements     500,000       1,000,000  
Pursuant to loan agreements           5,400,000  
Total     500,000       9,400,000  

 

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, 2022     December 31, 2021  
Risk-free interest rate     2.99 %     0.16% to 0.97 %
Expected life     3.0 years       2.03.0 years  
Expected dividend rate     0 %     0 %
Expected volatility     281 %     277% to 356 %