1
|
NAMES OF REPORTING PERSONS
|
||||
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
|
|||||
KENT P. WATTS
|
|||||
2
|
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a)
|
o
|
||
(b)
|
o
|
||||
3
|
SEC USE ONLY
|
||||
4
|
SOURCE OF FUNDS
|
||||
OO, SC, PF
|
|||||
5
|
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f)
|
o
|
|||
6
|
CITIZENSHIP OR PLACE OF ORGANIZATION
|
||||
United States of America
|
|||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7
|
SOLE VOTING POWER
750,000 voting shares which 3,000 shares of Series B Convertible Preferred Stock are eligible to vote.
|
|||
8
|
SHARED VOTING POWER
|
||||
3,970,166 shares of common stock, 750,000 shares of common stock issuable upon conversion of 3,000 shares of Series B Convertible Preferred Stock and 688,889 shares of common stock issuable upon conversion of $516,667 of Convertible Promissory Notes held by Mr. Watts (not including any accrued and unpaid interest on such notes, which notes are convertible into common stock at the rate of $0.75 per share), all of which are subject to the voting agreement described below.
|
|||||
9
|
SOLE DISPOSITIVE POWER
|
||||
5,286,833 shares of the Issuer’s outstanding common stock, consisting of 3,970,166 shares of common stock, 750,000 shares of common stock issuable upon conversion of 3,000 shares of Series B Convertible Preferred Stock and 688,889 shares of common stock issuable upon conversion of $516,667 of Convertible Promissory Notes held by Mr. Watts (not including any accrued and unpaid interest on such notes, which notes are convertible into common stock at the rate of $0.75 per share).
|
|||||
10
|
SHARED DISPOSITIVE POWER
|
||||
- 0 -
|
|||||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
|
||||
5,286,833 shares of the Issuer’s outstanding common stock, consisting of 3,970,166 shares of common stock, 750,000 shares of common stock issuable upon conversion of 3,000 shares of Series B Convertible Preferred Stock and 688,889 shares of common stock issuable upon conversion of $516,667 of Convertible Promissory Notes held by Mr. Watts (not including any accrued and unpaid interest on such notes, which notes are convertible into common stock at the rate of $0.75 per share).
|
|||||
12
|
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|
o
|
|||
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
|
||||
20.6%
|
|||||
14
|
TYPE OF REPORTING PERSON
|
||||
IN
|
|||||
Item 1.
|
Security and Issuer
|
This statement relates to the common stock, par value $0.001, of Hydrocarb Energy Corporation, formerly Duma Energy Corp., a Nevada corporation (the “Issuer” or the “Company”). The Issuer maintains its principal executive offices at 800 Gessner, Suite 375, Houston, Texas 77024.
|
Item 2.
|
Identity and Background
|
(a)
|
This statement is filed by Mr. Kent P. Watts.
|
(b)
|
The business address for Mr. Watts is:
|
800 Gessner, Suite 375, Houston, Texas 77024.
|
|
(c)
|
Mr. Watts is the Chairman and Chief Executive Officer of the Issuer.
|
(d)-(e)
|
During the last five years, Mr. Watts: (i) has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) was not a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
|
(f)
|
Mr. Watts is a citizen of the United States of America.
|
Item 3.
|
Source and Amount of Funds or Other Consideration
|
On December 2, 2013, the Board of Directors of the Company approved, and the Company filed a Certificate of Designation with the Secretary of State of Nevada to create a Series A 7% Convertible Voting Preferred Stock (“Series A Preferred”). The designation authorized up to 10,000 shares of Series A Preferred. Pursuant to the designation, the Series A Preferred has a stated value of $400 per share, pays annual dividends at 7%, is convertible into the Company’s common stock (together with accrued and unpaid dividends), at the holder’s option, at a conversion rate of $6.00 per share, and is neither redeemable nor callable. The designation provides that the Series A Preferred stockholders may vote their common stock equivalent voting power (i.e., the number of shares of common stock which the Series A Preferred stock shares convert into).
On December 9, 2013 (the “Acquisition Date”), the Company acquired Hydrocarb Corporation, a Nevada corporation (“HCN”) pursuant to a Share Exchange Agreement (the “Share Exchange”) dated November 27, 2013. The purchase price was 8,396,667 shares of the Company’s common stock to HCN’s stockholders in exchange for 100% of the outstanding equity interest in HCN and 8,188 shares of the Series A Preferred to Kent P. Watts, a holder of convertible preferred stock in HCN in exchange for 100% of his preferred stock in HCN. At date of closing the 8,396,667 shares of common stock issued had a market valuation of $64,990,200 (based on closing of $7.74 on December 9, 2013). A total of 8,188 shares of Series A Preferred were issuable to Kent P. Watts, which had a face value of $3,275,200 ($400 x 8,188) and were convertible into (not withstanding any accrued and unpaid dividends) 545,867 shares of the Company’s common stock based on the $6 per share conversion price. Such shares, when validly issued, would also have had the right to vote 545,867 voting shares.
Mr. Watts acquired 7,989,698 shares of the Issuer’s common stock and 8,188 shares of the Issuer’s Series A Preferred Stock in connection with the closing of the Share Exchange.
Prior to the Share Exchange, Mr. Watts owned 4,607 shares of the Issuer’s common stock, which he acquired in an open market purchase with personal funds.
On April 30, 2014 and July 31, 2014, Mr. Watts received 1,720 and 2,105 shares, respectively, as consideration for services rendered as a member of the Board of Directors of the Company.
On January 30, 2015, Mr. Watts received 3,030 shares of common stock as consideration for services rendered as a member of the Board of Directors of the Company.
On May 8, 2015, Mr. Watts received 3,333 shares of common stock as consideration for services rendered as a member of the Board of Directors of the Company.
In connection with certain due diligence undertaken by the Company, it came to the attention of management, that although the Company previously believed, on advice of prior counsel, that the Board of Directors of the Company had the authority under the Company’s Articles of Incorporation, as amended, to unilaterally authorize preferred stock, including the designation of the Series A Preferred, that under applicable Nevada law, unless such preferred stock is specifically authorized in a Nevada corporation’s articles no preferred stock can be designated or issued. As such, the Company’s Board of Directors did not have authority under the Articles of Incorporation, as amended, and applicable Nevada law to designate the Series A Preferred or to file such certificate of designations with the Secretary of State of Nevada. Consequently, the Company believes that the Series A Preferred was never validly issued or outstanding and the filing of the Series A Preferred designation with the consent of the Board of Directors and without shareholder approval, was invalid and had no legal effect.
Notwithstanding the above, the documentation relating to the designation of the Series A Preferred was filed with and accepted by the Secretary of State of Nevada and the Company had previously been treating the Series A Preferred as validly issued and outstanding.
|
(a)
|
the acquisition by persons of additional securities of the Issuer, or the disposition of securities of the Issuer;
|
(b)
|
a reorganization involving the Issuer;
|
(c)
|
a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries;
|
(d)
|
a change in the present board of directors and management of the Issuer, including plans or proposals to change the number or term of directors or to fill any existing vacancies on the board;
|
(e)
|
a material change in the present capitalization or dividend policy of the Issuer;
|
(f)
|
other material changes in the Issuer’s business or corporate structure;
|
(g)
|
changes in the Issuer’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person;
|
Mr. Watts does not have any immediate plans or proposals which relate to or result in:
|
|
(h)
|
causing a class of securities of the Issuer to be delisted from a national securities exchange or cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association;
|
|
|
(i)
|
a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or
|
(j)
|
any action similar to any of those enumerated in (h) through (i), above.
|
Item 5.
|
Interest in Securities of the Issuer
|
(a)
|
For the purposes of this statement, Kent P. Watts is reporting herein that as of the date hereof, he was the beneficial owner of 5,286,833 shares (or approximately 20.6%) of the Issuer’s outstanding common stock, consisting of 3,970,166 shares of common stock, 750,000 shares of common stock issuable upon conversion of 3,000 shares of Series B Convertible Preferred Stock and 688,889 shares of common stock issuable upon conversion of $516,667 of Convertible Promissory Notes held by Mr. Watts (not including any accrued and unpaid interest on such notes, which notes are convertible into common stock at the rate of $0.75 per share).
|
(b)
|
For the purposes of this statement, Kent P. Watts is reporting herein that as of the date hereof, he had the sole power to vote or to direct the voting of, or to dispose or to direct the disposition of 3,000 shares of Series B Convertible Preferred Stock and the 750,000 voting shares associated therewith. Mr. Watts shares the right to vote or to direct the vote of 3,970,166 shares of common stock and an additional 750,000 shares of common stock issuable upon conversion of 3,000 shares of Series B Convertible Preferred Stock and 688,889 shares of common stock issuable upon conversion of $516,667 of Convertible Promissory Notes held by Mr. Watts (not including any accrued and unpaid interest on such notes, which notes are convertible into common stock at the rate of $0.75 per share) with Mr. Herndon pursuant to the voting agreement described above. Mr. Watts has the sole power to dispose or to direct the disposition of the 3,970,166 shares of common stock subject to the terms of the voting agreement, and the other securities he has the right to receive upon the conversion of the Series B Convertible Preferred Stock and convertible notes, subject to the terms of the voting agreement.
|
(c)
|
As of the date hereof, and within the sixty day period prior thereto, no transactions involving the Issuer’s equity securities had been engaged in by the Reporting Person other than as disclosed in Item 3 above.
|
(d)
|
As of the date hereof, to the best knowledge and belief of the undersigned, no person other than the Reporting Person had the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Issuer’s equity securities.
|
(e)
|
Not Applicable.
|
Item 6.
|
Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
|
See the description of the voting agreement described in Item 3 above.
|
Item 7.
|
Material to Be Filed as Exhibits
|
10.1(1)
|
Voting Agreement (August 25, 2015) between Kent P. Watts and S. Chris Herndon
|
10.2(2)
|
First Amendment to Voting Agreements (November 16, 2015) by and between S. Chris Herndon, Kent P. Watts and Christopher Watts
|
November 25, 2015
|
By:
|
/s/ Kent P. Watts
|
|