Item 3.02 Unregistered Sales of Equity Securities.
On January 2, 2020, we sold 1,666,667 restricted shares of common stock to an
individual investor for a total purchase price of $1,000,000, in a private
offering. As part of the sale, we also issued the investor a five-year warrant
to purchase 1,666,667 shares of common stock at an exercise price of $0.80 per
share. The warrant agreement provides that the holder cannot convert if such
conversion will result in the holder beneficially owning in excess of 4.99% of
our shares of common stock outstanding immediately after giving effect to such
exercise. By written notice, the holder may from time to time increase or
decrease this percentage to any other percentage not in excess of 19.99%,
provided that any such increase will not be effective until the 61st day after
such notice is delivered to us.
On December 3, 2019, we sold a $540,000 convertible promissory note to an
individual investor for a purchase price of $540,000, in a private offering. The
promissory note has a term of 12 months and earns interest at the rate of 10%
per annum, to be paid in one lump sum at maturity. The holder of the promissory
note has the right to convert the note into either common stock at a conversion
price of $0.75 per share or into a working interest in our subsidiary Hudspeth
Oil Corporation's working interest in certain oil and gas leases covering
134,000 acres in Hudspeth County, Texas, known as the "Orogrande Project." The
note holder's working interest (determined on a percentage basis) would be equal
to one acre of the Orogrande Project per $1,100 of principal amount and unpaid
interest thereon that is converted. By way of example, if the holder elects to
convert $550,000 in principal amount and unpaid interest thereon into a working
interest, then such holder would receive 0.00373% of the Orogrande Project
(i.e., a 0.00373% working interest in 100% of the entire Orogrande Project).
On November 25, 2019, we sold 300,000 restricted shares of common stock to an
individual investor for a total purchase price of $180,000, in a private
offering.
All of the above sales of securities were sold under the exemption from
registration provided by Section 4(a)(2) of the Securities Act of 1933 and the
rules and regulations promulgated thereunder. The issuances of securities did
not involve a "public offering" based upon the following factors: (i) the
issuances of securities were isolated private transactions; (ii) a limited
number of securities were issued to a limited number of purchasers; (iii) there
were no public solicitations; (iv) the investment intent of the purchasers; and
(v) the restriction on transferability of the securities issued.
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