Item 3.02 Unregistered Sales of Equity Securities
Series A Financing
On January 31, 2019 (the
“
Closing
Date
”), Petro River Oil
Corp. (the “
Company
”) sold and issued an aggregate of 178,101
units (“
Units
”), for an aggregate purchase price of
$3,562,014.95, to certain accredited investors (the
“
New
Investors
”) pursuant to a
Securities Purchase Agreement (“
SPA
”), the form of which is attached hereto as
Exhibit 10.1, and to certain debtholders (the
“
Debt
Holders
”) pursuant to
Debt Conversion Agreements (the “
Debt Conversion
Agreements
”), copies of
which are attached hereto as Exhibit 10.2 and 10.3 (the
“
Offering
”). The Units sold and issued in the
Offering consisted of an aggregate of (i) 178,101 shares of the
Company’s newly created Series A Convertible Preferred Stock,
par value $0.00001 per share (“
Series A
Preferred
”) (the
“
Shares
”), convertible into 8,905,037 shares of the
Company’s common stock, par value $0.00001 per share
(“
Common
Stock
”), and (ii)
five-year warrants (“
Warrants
”) to purchase 8,905,307 shares of Common
Stock, at an exercise price of $0.50 per share, a form of which
Warrant is attached hereto as Exhibit 4.1. Pursuant to the Debt
Conversion Agreement, the Debt Holders, consisting of Scot Cohen,
the Company’s executive Chairman, and Fortis Oil & Gas,
agreed to convert all outstanding debt owed to the Debt Holders,
amounting to $300,000 and $321,836, respectively, into Units issued
pursuant to the SPA.
The Offering resulted in net cash proceeds to the
Company of approximately $3.0 (the “
Net
Proceeds
”), which Net
Proceeds do not include the amount of debt converted into Units by
the Debt Holders. The Company currently intends to use the Net
Proceeds to fund the drilling of ten additional development and
exploration wells in its Osage County concession (the
“
New
Drilling Program
”), and a
large exploration venture in the North Sea, United Kingdom with
Horizon Energy Partners, LLC.
In connection with the Offering, on January 31,
2019 Bandolier Energy, LLC (“
Bandolier
”), a wholly owned subsidiary of the
Company, entered into Assignment of Net Profit Interest agreements,
(the “
Assignment
Agreements
”) with each of
the New Investors and Debt Holders, a form of which is attached
hereto as Exhibit 10.4, pursuant to which (i) Bandolier assigned
and transferred to the New Investors and Debt Holders a 75%
interest in profits, if any, derived from the ten new wells the
Company intends to drill pursuant to the New Drilling Program,
payments of which shall be made to the New Investors and Debt
Holders, pro rata, on a quarterly basis following the full
completion of the New Drilling Program, and (ii) in the event the
Company elects to drill additional wells on its Osage County
concession in the next two years, the New Investors and Debt
Holders shall have the right to participate in and fund the
drilling and production of the next ten wells on the same terms and
conditions set forth in the Assignment
Agreements.
Senior Secured Debt Exchange
On January 31, 2019, the Company entered
agreements (the “
Secured Debt Conversion
Agreements
”) with Petro
Exploration Funding, LLC and Petro Exploration Funding II, LLC
(together, the “
Secured Debt
Holders
”), pursuant to
which they agreed to convert approximately $2.3 million and $2.8
million, respectively, of outstanding senior secured debt
(including accrued and unpaid interest) (the
“
Senior Secured
Debt
”) owed under the
terms of their respective Senior Secured Promissory Notes into
116,374 and 140,130 shares of the Company’s newly created
Series A Preferred, respectively (the “
Senior Secured Debt
Exchange
”). As a result
of the Senior Secured Debt Exchange, all indebtedness, liabilities
and other obligations arising under the respective Senior Secured
Promissory Notes were cancelled and deemed satisfied in full.
Copies of the Senior Secured Debt Conversion Agreements are
attached hereto as Exhibits 10.5 and 10.6.
As
additional consideration for the conversion of the Senior Secured
Debt, the Company agreed to (i) reduce the exercise price of
warrants issued to the Secured Debt Holders on June 15, 2017 and
November 6, 2017 from $2.38 and $2.00, respectively, to $0.50 per
share of Common Stock issuable upon the exercise of such warrants,
and (ii) to extend the expiration date of such warrants to five
years from the Closing Date.
The issuance of the shares of Series A Preferred
and Warrants issued as a part of the Units in the Offering, as well
as the shares of Series A Preferred issue in connection with the
Senior Secured Debt Exchange, were each exempt from the
registration requirements of the Securities Act of 1933, as amended
(the “
Securities
Act
”), in reliance
on the exemptions provided by Section 701 and/or Section 4(a)(2) of
the Securities Act as provided in Rule 506 of Regulation D
promulgated thereunder. The shares of Series A Preferred, Warrants
and the Common Stock issuable upon exercise of the Warrants have
not been registered under the Securities Act or any other
applicable securities laws, and unless so registered, may not be
offered or sold in the United States except pursuant to an
exemption from the registration requirements of the Securities
Act.
The
foregoing descriptions of the SPA, Debt Conversion Agreements,
Warrant, Assignment Agreements and Secured Debt Conversion
Agreements do not purport to be complete, and are qualified in
their entirety by reference to the form of SPA, Debt Conversion
Agreements, form of Warrant, form of Assignment Agreement and
Secured Debt Conversion Agreements, attached to this Current Report
on Form 8-K as Exhibits 10.1, 10.2 and 10.3, 4.1, 10.4, and
10.5 and 10.6, respectively, each of which are incorporated by
reference herein.
A
copy of the Company’s press release, issued on February 1,
2019, announcing the Offering and the Senior Secured Debt Exchange
is attached hereto as Exhibit 99.1.