| 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 $134,393 were declared for the nine months ended September
30, 2021, and $135,025 the nine months ended September 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. It was understood that the monthly fees would be accrued until cashflow
permitted payment. 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 a later date. 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 of Petrolia Energy Corporation 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:
SCHEDULE OF COMMON STOCK PURCHASE WARRANTS ISSUED AND OUTSTANDING
| | |
Warrants | | |
Weighted Average Exercise Price | |
| Outstanding at year ended December 31, 2019 | |
| 57,043,836 | | |
$ | 0.14 | |
| Granted | |
| 18,650,000 | | |
| 0.15 | |
| Exercised | |
| (1,650,000 | ) | |
| 0.08 | |
| Expired | |
| (33,279,170 | ) | |
| 0.19 | |
| Outstanding at December 31, 2020 | |
| 40,764,666 | | |
$ | 0.13 | |
| Granted | |
| 8,400,000 | | |
| 0.09 | |
| Expired | |
| (17,964,666 | ) | |
| 0.11 | |
| Outstanding at September 30, 2021 | |
| 31,200,000 | | |
$ | 0.13 | |
As
of September 30, 2021, the weighted-average remaining contractual life of warrants outstanding was 1.57 years (December 31, 2020 –
1.39 years).
As
of September 30, 2021, the intrinsic value of warrants outstanding is $0.00 (December 31, 2020 - $0.00).
The
table below summarizes warrant issuances during the nine months ended September 30, 2021, and year ended December 31, 2020:
SCHEDULE OF WARRANTS ISSUANCE DURING PERIOD
| | |
September 30, 2021 | | |
December 31, 2020 | |
| Warrants granted: | |
| | | |
| | |
| Board of Directors and Advisory Board service | |
| 2,250,000 | | |
| 5,250,000 | |
| Pursuant to employment agreements | |
| — | | |
| 1,000,000 | |
| Pursuant to financing arrangements | |
| 750,000 | | |
| 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 | |
| 8,400,000 | | |
| 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.
SCHEDULE OF FAIR VALUE OF ASSUMPTION OF WARRANTS
| | |
September
30, 2021 | | |
December
31, 2020 | |
| Risk-free interest rate | |
| 0.22%
to 0.53 | % | |
| 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 | |
| 310%
to 356 | % | |
| 240%
to 274 | % |
|
