NOTE 12. 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. 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.

All shares of the Series A Preferred Stock were converted to common shares of stock on August 1, 2023. The Company determined that this conversion automatically occurred on May 3, 2022, per the terms of the Certificate of Designations of Petrolia Energy Corporation Establishing the Designations, Preferences, Limitations and Relative Rights of Its Series A Convertible Preferred Stock, filed with the Secretary of State of Texas on May 3, 2017. The accrued dividends on the Series A Preferred Stock were adjusted. They stopped accruing on May 3, 2022, however the unpaid dividends accrued interest at a rate of 12%. The accrued dividends were adjusted to reflect this, and instructions have been sent to the Company’s transfer agent to complete the conversion. Series A Preferred shareholders were informed of this conversion by letter, as required by the Certificate filed with the State of Texas.

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 $6,582 and $6,478 were declared for the nine months ended September 30, 2023, and September 30, 2022, respectively.

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:

 SCHEDULE OF COMMON STOCK PURCHASE WARRANTS ISSUED AND OUTSTANDING

As of September 30, 2023, the weighted-average remaining contractual life of warrants outstanding was 0.57 years (December 31, 2022 – 0.81 years).

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

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

 SCHEDULE OF WARRANTS ISSUANCE DURING PERIOD

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.

 SCHEDULE OF FAIR VALUE OF ASSUMPTION OF WARRANTS