Quarterly report pursuant to Section 13 or 15(d)

Common Stock

v3.5.0.2
Common Stock
9 Months Ended
Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Common Stock
Note 6. Common Stock

 

On December 24, 2015, FPI issued 4,500,000 shares of its common stock to Wilshire Energy Partners, LLC, as more fully discussed in Note 4 of these financial statements.

 

On December 24, 2015, FPI entered into a convertible promissory note in the amount of $600,000 with Alternus Capital Holdings Limited, a British Virgin Islands company. The two-year note matures on December 23, 2017, and accrues interest at 8% per year. By its terms the note was automatically required to convert the outstanding principal and interest due under the terms of the note upon a merger or other combination occurring between FPI and an entity with shares listed for trading (“Pubco”). The conversion price of the note was established at $0.665 per share (the “Conversion Price”), subject to adjustment as described below. On April 5, 2016, and under substantially similar terms described herein, FPI received an additional $400,000 from Alternus Capital Holdings Limited. On May 27, 2016, the shareholders of FPI entered into the Share Exchange Agreement with Key Link, pursuant to which the principal amount of the notes together with any accrued, but unpaid interest was converted into the shares of the Company at a conversion price of $0.665 per share. The total amount of shares issued to Alternus Capital Holdings Limited pursuant to the conversion of the note is 1,503,759. All accrued interest was waived and recorded as additional paid in capital.

 

Effective April 1, 2016, FPI appointed two directors to its board. Each director was granted 125,000 shares of its common stock (the "FPI Directors Shares"), vesting according to the following schedule: (i) 40% vesting ninety (90) days from the appointment date; (ii) 20% vesting one hundred eighty (180) days from the appointment date; (iii) 20% vesting two hundred seventy (270) days following the appointment date; (iv) 20% vesting three hundred sixty (360) days following the Effective Date. As of September 30, 2016, 50,000 shares were issued to each director. These shares were valued at $1,000.

 

On May 2, 2016, Foothills Petroleum Inc., a Nevada corporation ("FPI”) acquired 14,112,250 pre-split shares of the common stock of Key Link Assets Corp. (“Key Link” or the “Company”) from five persons constituting approximately 96% of our issued and outstanding shares (the "FPI Acquired Shares"). These shares were acquired for cash of $316,035, which was expensed in the period it was incurred. Please see our Form 8-K filed with the Securities and Exchange Commission on May 6, 2016.

 

As of May 16, 2016, we effected a 4:1 forward split of our shares of common stock. Please see our Form 8-K filed with the SEC on May 19, 2016. All references to the number of shares issued and outstanding in these financial states have been retrospectively restated for the forward split.

 

The 14,112,250 pre-split shares were converted into 56,449,000 shares, and were returned to treasury for cancellation. A total of 2,360,000 shares remained outstanding held by the shareholders of the merged public company post the reverse merger acquisition.

 

On May 2, 2016, after obtaining the FPI Acquired Shares, FPI caused the Company to appoint its two non-executive directors to the Board of the Company. These directors exchanged their rights to the FPI Directors Shares for Company shares having substantially the same terms and provisions. On May 2, 2016 the Company also granted 150,000 shares of its common stock to its CEO as a part of his compensation package. The shares have the same vesting schedule as directors’ shares described above. As of September 30, 2016, 60,000 shares were issued to the Company’s CEO. These shares were valued at $600.

 

During the nine months ended September 30, 2016, the Company issued 5,000 shares to a service provider per consulting agreement. The shares were valued at $7,650.

 

On May 27, 2016, we entered into a Share Exchange Agreement ("Share Exchange Agreement") with the shareholders of FPI whereby we acquired all of the outstanding shares of FPI for an aggregate of 6,003,759 shares of our common stock, of which 4,500,000 shares of our common stock were issued to Wilshire Energy Partners, LLC ("Wilshire") and 1,503,759 of our shares of common stock were issuable to Alternus Capital Holdings Ltd. ("Alternus") (“Share Exchange”). As a result of the Share Exchange, FPI became our wholly owned subsidiary and the FPI Acquired Shares were to be returned to treasury, deemed canceled and no longer outstanding.  We also exchanged warrants to purchase 700,000 shares of FPI common stock, that were issued to Wilshire on May 4, 2016, for a like amount of warrants to purchase shares of Company common stock (the "Wilshire Warrants"). The Wilshire Warrants:

   

  have a term of five years;
  are exercisable at $1.25 per share as to 100,000 shares;
  are exercisable at $2.00 per share as to 200,000 shares;
  are exercisable at $3.00 per share as to 400,000 shares;
  do not have a cashless exercise feature; and
  are not exercisable for one year.

 

Following the closing of the Share Exchange transaction we had 8,363,759 shares of common stock outstanding (excluding the FPI Acquired Shares, which were deemed canceled following the Share Exchange), of which Wilshire and Alternus own in the aggregate 6,003,759 shares, or approximately 71.8% of the outstanding common stock. As of the date of this filing the Company has no shares of preferred stock issued and outstanding.  

 

On June 30, 2016, we entered into a Securities Purchase Agreement with Berwin Trading Limited, a British Virgin Islands company (“Berwin”), pursuant to which we sold and agreed to issue 3,007,519 shares of our common stock, $0.0001 par value, at a purchase price of $0.665 per share for an aggregate amount of $2,000,000.

 

As of September 30, 2016, the Company had 11,536,278 shares of common stock issued and outstanding.

 

Restricted Stock Units (RSUs)

 

On August 11, 2016, FPI granted Mr. Lanclos 100,000 restricted stock units (RSUs) of the Company of which (i) 20,000 shall vest 180 days from August 15, 2016, (ii) another 20,000 shall vest 270 days from August 15, 2016 and (iii) the remaining 60,000 shall vest 365 days from August 15, 2016. The Company has a right, but not an obligation to repurchase all or any portion of RSUs granted to the executive at a purchase price of $0.665 per share if executive’s employment with the Company is terminated for any reason within 30 months of start of employment on August 15, 2015. As of September 30, 2016, these shares were valued at $9,178.

 

On August 15, 2016, FPI granted Mr. Ovalle 100,000 restricted stock units (RSUs) of the Company of which (i) 20,000 shall vest 180 days from August 15, 2016, (ii) another 20,000 shall vest 270 days from August 15, 2016 and (iii) the remaining 60,000 shall vest 365 days from August 15, 2016. The Company has a right, but not an obligation to repurchase all or any portion of RSUs granted to the executive at a purchase price of $0.665 per share if executive’s employment with the Company is terminated for any reason within 30 months of start of employment on August 15, 2015. As of September 30, 2016, these shares were valued at $8,444.

 

Warrants

 

On May 27, 2016, the Company granted to Wilshire Energy Partners warrants for services (“Wilshire Warrants”) to purchase (i) 100,000 shares at a strike price of $1.25 per share, (ii) 200,000 shares at a strike price of $2.00 per share and (iii) 400,000 shares at a strike price of $3.00 per share. The Wilshire Warrants commence to be exercisable on the earlier of (i) 12 month anniversary of the closing of a going public transaction or (ii) June 30, 2017, and will expire on June 1, 2021.

 

On May 27, 2016, the Company granted to an unrelated party warrants to purchase (i) 125,000 shares at a strike price of $1.25 per share, (ii) 100,000 shares at a strike price of $2.00 per share and (iii) 100,000 shares at a strike price of $3.00 per share. The warrants commence to be exercisable on the earlier of (i) 12 month anniversary of the closing of a going public transaction or (ii) June 30, 2017, and will expire on June 1, 2021.

 

The fair value of all warrants was determined to be $2,144 using the Black-Scholes option-pricing model based on the following assumptions: (i) volatility rate of 120%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 5 years.

 

The following table summarizes all stock warrant activity for the nine months ended September 30, 2016:

 

    Number of Warrants     Weighted Average 
Exercise Price
    Weighted Average 
Remaining Contractual 
Term
 
Balance outstanding, December 31, 2015     -     $ -       -  
Granted     1,025,000       2.32       4.92  
Exercised     -       -       -  
Cancelled or expired     -       -       -  
Balance outstanding, September 30, 2016     1,025,000     $ 2.32       4.92  
Exercisable, September 30, 2016     -     $ -       -  

 

Options

 

On May 19, 2016, the Company granted to each of its three directors options to purchase (i) 50,000 shares at a strike price of $2 per share, vesting when the Company achieves and maintains a total average daily production level of 100 boe/d for at least 30 days, (ii) 50,000 shares at a strike price of $3 per share, vesting when the Company achieves and maintains a total average daily production level of 200 boe/d for at least 60 days, and (iii) 50,000 shares at a strike price of $4 per share, vesting when the Company achieves and maintains a total average daily production level of 500 boe/d for at least 90 days.

 

The following table summarizes all stock option activity for the nine months ended September 30, 2016:

 

    Number of Option     Weighted Average 
Exercise Price
    Weighted Average 
Remaining Contractual 
Term
 
Balance outstanding, December 31, 2015     -     $ -       -  
Granted     450,000       3.00       9.89  
Exercised     -       -       -  
Cancelled or expired     -       -       -  
Balance outstanding, September 30, 2016     450,000     $ 3.00       9.89  
Exercisable, September 30, 2016     -     $ -       -