Annual report pursuant to Section 13 and 15(d)

Common Stock

v3.10.0.1
Common Stock
12 Months Ended
Dec. 31, 2017
Equity [Abstract]  
Common Stock

Note 9 – Common Stock

 

Effective April 1, 2016, Foothills appointed two directors to its board. Each director was granted 125,000 shares of common stock (the “Foothills 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 appointment date. During the year ended December 31, 2017, we issued 25,000 shares of common stock to each director. As of December 31, 2017, the Company issued 125,000 shares to each director and the Company incurred compensation expense for each director of $1,250 for these share issuances. These Foothills Director Shares issued in April 2016 all vested approximately one year later pursuant to the terms and conditions of the grant.

  

On May 2, 2016, 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.

 

As of May 16, 2016, Foothills effected a 4:1 forward split of its shares of common stock. 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 post-split 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 restricted 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. These shares granted in May 2016 all vested approximately one year later pursuant to the terms and conditions of the grant. During the year ended December 31, 2017, we issued 30,000 shares of common stock. As of December 31, 2017, 150,000 shares were issued and the Company incurred compensation expense of $1,500 for these share issuances.

 

On May 27, 2016, we entered into a 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 (“Share Exchange”). As a result of the Share Exchange, FPI became our wholly owned subsidiary and the FPI Acquired Shares were returned to treasury, deemed canceled and no longer outstanding. We also exchanged warrants to purchase 700,000 shares of Foothills’ common stock, that were issued to Wilshire on May 4, 2016, for a like amount of warrants to purchase shares of the Company’s 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
     
  were not exercisable for one year.

 

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.

 

On December 30, 2016, we issued 2,083,334 shares of common stock in connection with the TBL acquisition (see Note 3), at a purchase price of $1.83 per share for an aggregate amount of $3,812,500.

 

On May 31, 2017, we entered into a Securities Purchase Agreement with Wilshire Energy Partners, LLC, a principal shareholder, pursuant to which we sold and agreed to issue 200,000 units at a purchase price of $1.00 per unit for an aggregate amount of $200,000. Each unit consisted of one share of the Company’s common stock and one warrant to purchase a share of the Company’s common stock, exercisable for a period of three years from the date of original issuance at an exercise price of $1.50 per share. Wilshire Energy Partners, LLC, is controlled by Kevin J. Sylla, our Executive Chairman and Chief Executive Officer of FPI. See Form 8-K filed by the Company on June 5, 2017 with the Commission and exhibit thereto. On September 29, 2017, we issued 100,752 additional shares of common stock and total warrants as amended to purchase 300,752 shares of common stock of the Company at a strike price of $0.665 per share due to down round feature triggered by warrant issued at a strike price of $0.665 per share on the day of trigger.

  

On June 15, 2017, we entered into a Securities Purchase Agreement with an investor, pursuant to which we sold and agreed to issue 20,000 units at a purchase price of $1.00 per unit for an aggregate amount of $20,000. Each unit consisted of one share of the Company’s common stock and one warrant to purchase one additional share of the Company’s common stock, exercisable for a period of three years from the date of original issuance at an exercise price of $1.50 per share. We received the initial $10,000 on June 15, 2017, and the balance of the subscribed amount in July 2017. On September 29, 2017, we issued 10,075 additional shares of common stock and total warrants as amended to purchase 30,075 shares of common stock of the Company at a strike price of $0.665 per share due to a down round feature triggered by a warrant issued at a strike price of $0.665 per share on the day of trigger.

 

On June 30, 2017, we entered into a Securities Purchase Agreement with a third-party investor, pursuant to which we sold and agreed to issue 25,000 units at a purchase price of $1.00 per unit for an aggregate amount of $25,000. Each unit consisted of one share of the Company’s common stock and one warrant to purchase one additional share of the Company’s common stock, exercisable for a period of three years from the date of original issuance at an exercise price of $1.50 per share. On September 29, 2017, we issued 12,594 additional shares of common stock and total warrants as amended to purchase 37,594 shares of common stock of the Company at a strike price of $0.665 per share due to a down round feature triggered by a warrant issued at a strike price of $0.665 per share on the day of trigger.

 

On July 10, 2017, we entered into a Securities Purchase Agreement pursuant to which we sold 25,000 units at a purchase price of $1.00 per unit for an aggregate amount of $25,000. Each unit consisted of one share of the Company’s common stock and one warrant to purchase a share of the Company’s common stock, exercisable for a period of three years from the date of original issuance at an exercise price of $1.50 per share.

 

We measured the value of the effect of the down round feature as the difference between the fair value of the financial instrument at an original exercise price of $1.50 and an adjusted exercise price of $0.665 and, as a result, $59,801 was recorded as down round feature as interest expense under ASC 260-10-30-1. Foothills determined the amount of $59,801 using the Black-Scholes option-pricing model based on the following assumptions: (i) volatility rate of 94%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 3 years.

 

On November 3, 2017, the Company issued 100,000 shares of common stock upon extension of the Berwin debenture, valued at $48,000.

 

On November 3, 2017, the Company agreed to issue 100,000 shares of common stock upon extension of the Profit Well debenture. The Company recorded $48,000 in stock payable.

 

On November 6, 2017, the Company agreed to issue 75,000 shares of common stock upon extension of a debenture entered on September 29, 2017. The Company recorded $36,000 in stock payable.

 

On November 17, 2017, the Company issued 60,000 shares of common stock in connection with a senior convertible promissory note. These shares were valued at $18,250.

 

On December 30, 2017, the Company agreed to issue 30,000 shares of common stock upon extension of a debenture entered on September 29, 2017. The Company recorded $9,900 in stock payable.

 

Each of the purchasers is an accredited investor within the meaning of the federal securities laws. The Company paid no brokerage, commission or finder’s fee in connection with these transactions. These transactions were exempt from registration under Section 4(a)(2) of the Securities Act of 1933.

 

During the year ended December 31, 2017, the Company issued 275,000 shares of common stock to various third parties for services, valued at $453,500.

 

As of December 31, 2017, the Company had 14,900,627 shares of common stock issued and outstanding.

  

Restricted Stock Units (RSUs)

 

Effective August 11, 2016, and on August 15, 2016, Foothills granted one of its executive officers, Mr. R. Lanclos, 100,000 restricted stock units (RSUs) of the Company which vested as follows (i) 20,000 vested on February 15, 2017, (ii) 20,000 vested on May 15, 2017, and (iii) 60,000 vested on August 15, 2017. The Company has the right, but not the obligation to repurchase all or any portion of RSUs granted to the executive at a price of $0.665 per share if the executive’s employment with the Company is terminated for any reason within 30 months of start of employment on August 15, 2015. These RSU’s were valued at $67,000 on the grant day. As of December 31, 2017, 100,000 shares were vested and were issued to Mr. Lanclos.

 

On August 15, 2016, Foothills also granted one of its executive officers, Mr. E. Ovalle, 100,000 restricted stock units (RSUs) of the Company which vested as follows (i) 20,000 vested on February 15, 2017, (ii) 20,000 vested on May 15, 2017, and (iii) 60,000 vested on August 15, 2017. The Company has the right, but not the obligation to repurchase all or any portion of RSUs granted to the executive at a 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. These RSU’s were valued at $67,000 on the grant day. As of December 31, 2017, 100,000 shares were vested and were issued to Mr. Ovalle.

 

Warrants

 

On May 27, 2016, the Company granted to Wilshire Energy Partners, LLC, warrants (“Wilshire Warrants”) to purchase (i) 100,000 common shares at a strike price of $1.25 per share, (ii) 200,000 common shares at a strike price of $2.00 per share and (iii) 400,000 common 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 expire on June 1, 2021.

 

On May 27, 2016, the Company granted to an unrelated party warrants to purchase (i) 125,000 common shares at a strike price of $1.25 per share, (ii) 100,000 common shares at a strike price of $2.00 per share and (iii) 100,000 common 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 expire on June 1, 2021.

 

The fair value of above warrants was determined to be $2,144 on May 27, 2016, 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.

 

On November 7, 2017, the Company issued 50,000 warrants to purchase 50,000 shares of common stock of the Company at a strike price of $1.00 per share expiring on May 7, 2019 in connection with a senior convertible promissory note in the principal amount of $50,000. If the Company fails to pay the principal and accrued unpaid interest due and payable to Lender on or before the due date of the convertible note, then the Lender shall be provided the right to convert at either $0.665 per share or upon the same terms offered in FirstFire Opportunity Fund, LLC Note’s conversion options. The relative fair value of warrant was determined to be $3,381 on November 7, 2017, using the Black-Scholes option-pricing model based on the following assumptions: (i) volatility rate of 77%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 1.5 years.

 

On November 17, 2017, the Company issued an unaffiliated investor warrants to purchase 267,500 shares of the Company’s common stock at an exercise price of $1.00 per share and expires in 18 months, in connection with a senior convertible promissory note in the principal amount of $267,500.  The aggregate relative fair value of warrant was determined to be $10,750 on November 17, 2017, using the Black-Scholes option-pricing model based on the following assumptions: (i) volatility rate of 78%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 1.5 year.

  

The following table summarizes all stock warrant activity for the year ended December 31, 2017 and 2016:

 

    Number of
Warrants
    Weighted Average
Exercise Price
    Weighted Average
Remaining
Contractual Term
 
Balance outstanding, December 31, 2015     -     $ -       -  
Granted     1,025,000       2.32       4.42  
Exercised     -       -       -  
Cancelled or expired     -       -       -  
Balance outstanding, December 31, 2016     1,025,000     $ 2.32       4.42  
Granted     1,658,515       1.09       2.18  
Exercised     -       -       -  
Cancelled or expired     -       -       -  
Balance outstanding, December 31, 2017     2,683,515     $ 1.56       2.65  
Exercisable, December 31, 2017     -     $ -       -  

 

Options

 

On May 19, 2016, the Company granted to each of its then three directors options to purchase (i) 50,000 common shares at a strike price of $2 per share, vesting when the Company achieves and maintains a total average daily production level of 100 barrels of oil equivalent per day (“BOE/D”) for at least 30 days, (ii) 50,000 common 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 common 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.

 

On February 27, 2017, the Company granted to Mr. Christopher Jarvis, currently an officer and director, options to purchase 400,000 common shares at a strike price of $1.99 per share, vesting quarterly over two years commencing with the first quarter following the 90-day probationary period.

 

The fair value of 400,000 options was determined to be $616,055 on February 27, 2017, using the Black-Scholes option-pricing model based on the following assumptions: (i) volatility rate of 129%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 5 years.

 

On February 27, 2017, the Company granted to Mr. Kevin Sylla, currently our Executive Chairman of the Board, options to purchase 1,200,000 common shares at a strike price of $1.99 per share, vesting quarterly over the term of three years.

 

The fair value of 1,200,000 options was determined to be $1,986,902 on February 27, 2017, using the Black-Scholes option-pricing model based on the following assumptions: (i) volatility rate of 129%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 7 years.

 

During December 31, 2017 and 2016, we recorded $816,139 and $0 option expense. As of December 31, 2017, the unamortized option expense was $1,786,818.

 

The following table summarizes all stock option activity for the year ended December 31, 2017 and 2016:

 

    Number of Option     Weighted Average Exercise Price     Weighted Average Remaining Contractual Term  
Balance outstanding, December 31, 2015     -     $ -       -  
Granted     450,000       3.00       9.39  
Exercised     -       -       -  
Cancelled or expired     -       -       -  
Balance outstanding, December 31, 2016     450,000     $ 3.00       9.39  
Granted     1,600,000       -       -  
Exercised     -       -       -  
Cancelled or expired     -       -       -  
Balance outstanding, December 31, 2017     2,050,000     $ 2.21       6.26  
Exercisable, December 31, 2017     -     $ -       -