Quarterly report pursuant to Section 13 or 15(d)

EQUITY

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EQUITY
 6 Months Ended
Jun. 30, 2023
Equity [Abstract]  
EQUITY

NOTE 11. 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). The Series A Preferred Stock also automatically converts into common stock on the five-year anniversary of the filing of the designation of the Series A Preferred Stock with the Texas Secretary of State (which filing date was May 3, 2017). This automatic conversion should have occurred on May 3, 2022. We are in the process of informing the Series A Preferred shareholders of the automatic conversion of their Preferred shares to common shares. It is anticipated that the new common shares will be issued in early August 2023, after which shareholders will be notified of the conversion details. The previously accrued dividends through May 3, 2022 bear a default interest rate of 12% when they are not paid. In the first half of 2023, Series A Preferred Stock dividends in the amount of $154,172 have been accrued to account for the default rate, as well as regular quarterly dividends accrued in error after May 3, 2022.

 

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 the 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 $4,364 and $4,260 were declared for the six months ended June 30, 2023, and June 30, 2022, respectively.

 

Common stock

 

The common stock of Petrolia Energy Corporation is currently not publicly traded.

 

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, 2021     29,700,000       0.13  
Granted     1,000,000       0.10  
Expired     (6,730,000 )     0.11  
Outstanding at year ended December 31, 2022     23,970,000       0.13  
Granted     500,000       0.10  
Expired     (8,000,000 )     0.19  
Outstanding at June 30, 2023     16,470,000     $ 0.10  

 

As of June 30, 2023, the weighted-average remaining contractual life of warrants outstanding was 0.70 years (December 31, 2022 – 0.81 years).

 

As of June 30, 2023, the intrinsic value of warrants outstanding is $0.00 (December 31, 2022 - $0.00).

 

The table below summarizes warrant issuances during the six months ended June 30, 2023, and year ended December 31, 2022:

 

    June 30, 2023     December 31, 2022  
Warrants granted:                
Pursuant to financing arrangements     500,000       1,000,000  
Total     500,000       1,000,000  

 

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, 2023     December 31, 2022  
Risk-free interest rate     4.49 %     2.49% – 4.22 %
Expected life     3.0 years        3.0 years   
Expected dividend rate     0 %     0 %
Expected volatility     360 %     267% to 299 %