Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Nevada
(State or other jurisdiction of incorporation or organization) |
98-0550353
(I.R.S. Employer Identification No.) |
1999 Avenue of the Stars, Suite 2520
Los Angeles, California
(Address of principal executive offices) |
90067
(Zip code) |
Large accelerated filer ☐
|
Accelerated filer ☒
|
|
|
Non-accelerated filer ☐
|
Smaller reporting company ☐
|
|
|
|
|
|
|
|
|
|
|
|
Page No.
|
|
|
|
|
PART I. FINANCIAL INFORMATION
|
|||
|
|
|
|
|
Item 1.
|
Unaudited Financial Statements
|
3 |
|
|
|
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
21 |
|
|
|
|
|
Item 3
|
Quantitative and Qualitative Disclosures About Market Risk
|
28 |
|
|
|
|
|
Item 4T.
|
Controls and Procedures
|
28 |
|
|
|
|
PART II. OTHER INFORMATION
|
|||
|
|
|
|
|
Item 1
|
Legal Proceedings
|
29 |
|
|
|
|
|
Item 1A
|
Risk Factors
|
29 |
|
|
|
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
30 |
|
|
|
|
|
Item 3.
|
Defaults Upon Senior Securities
|
30 |
|
|
|
|
|
Item 4
|
Mine Safety Disclosures
|
30 |
|
|
|
|
|
Item 5.
|
Other Information
|
30 |
|
|
|
|
|
Item 6.
|
Exhibits
|
30 |
|
|
|
|
|
|
SIGNATURES
|
31 |
Eos Petro, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
|
||||||||
September 30,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
ASSETS
|
(unaudited)
|
|||||||
Current assets
|
||||||||
Cash
|
$
|
37
|
$
|
1,367
|
||||
Other current assets
|
-
|
12,878
|
||||||
Total current assets
|
37
|
14,245
|
||||||
Oil and gas properties, using the full cost method of accounting,
|
||||||||
net of accumulated depletion of $197,906 and $187,197, respectively
|
1,051,702
|
1,062,411
|
||||||
Other property plant and equipment, net of accumulated
|
||||||||
depreciation of $29,862 and $27,232, respectively
|
138
|
2,768
|
||||||
Long-term deposits
|
202,441
|
102,441
|
||||||
Total assets
|
$
|
1,254,318
|
$
|
1,181,865
|
||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$
|
1,559,171
|
$
|
1,084,621
|
||||
Accrued expenses
|
1,109,689
|
1,189,545
|
||||||
Accrued compensation - officer
|
317,752
|
180,000
|
||||||
Accrued termination fee
|
5,500,000
|
5,500,000
|
||||||
Accrued structuring fee
|
4,000,000
|
4,000,000
|
||||||
LowCal convertible and promissory notes payable
|
8,250,000
|
8,250,000
|
||||||
Notes payable, net of discount of $212,462 and $0
|
1,770,538
|
1,383,000
|
||||||
Notes payable, related party
|
-
|
1,208,160
|
||||||
Derivative liabilities
|
-
|
6,381,553
|
||||||
Total current liabilities
|
22,507,150
|
29,176,879
|
||||||
Asset retirement obligation
|
99,451
|
92,512
|
||||||
Total liabilities
|
22,606,601
|
29,269,391
|
||||||
Commitments and contingencies
|
||||||||
Stockholders' deficit
|
||||||||
Series B Preferred stock: $0.0001 par value; 44,000,000 shares authorized,
|
||||||||
none issued and outstanding
|
-
|
-
|
||||||
Common stock; $0.0001 par value; 300,000,000 shares authorized
|
||||||||
52,089,528 and 47,827,882 shares issued and outstanding
|
5,209
|
4,783
|
||||||
Additional paid-in capital
|
139,056,207
|
116,977,726
|
||||||
Stock subscription receivable
|
(88,200
|
)
|
(88,200
|
)
|
||||
Accumulated deficit
|
(160,325,499
|
)
|
(144,981,835
|
)
|
||||
Total stockholders' deficit
|
(21,352,283
|
)
|
(28,087,526
|
)
|
||||
Total liabilities and stockholders' deficit
|
$
|
1,254,318
|
$
|
1,181,865
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
Eos Petro, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
|
||||||||||||||||
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|||||||||||||
Revenues
|
||||||||||||||||
Oil and gas sales
|
$
|
-
|
$
|
39,863
|
$
|
36,519
|
$
|
170,822
|
||||||||
Costs and expenses
|
||||||||||||||||
Lease operating expense
|
13,164
|
39,131
|
55,493
|
103,788
|
||||||||||||
General and administrative
|
2,715,084
|
3,238,923
|
16,428,317
|
20,823,143
|
||||||||||||
Structuring fee
|
-
|
-
|
-
|
4,000,000
|
||||||||||||
Acquisition termination fee
|
-
|
-
|
-
|
5,500,000
|
||||||||||||
Total costs and expenses
|
2,728,248
|
3,278,054
|
16,483,810
|
30,426,931
|
||||||||||||
Loss from operations
|
(2,728,248
|
)
|
(3,238,191
|
)
|
(16,447,291
|
)
|
(30,256,109
|
)
|
||||||||
Other income (expense)
|
||||||||||||||||
Interest and finance costs
|
(449,063
|
)
|
(2,667,186
|
)
|
(3,888,298
|
)
|
(3,058,976
|
)
|
||||||||
Change in fair value of derivative liabilities
|
(113,840
|
)
|
(1,695,203
|
)
|
4,991,925
|
4,241,697
|
||||||||||
Total other income (expense)
|
(562,903
|
)
|
(4,362,389
|
)
|
1,103,627
|
1,182,721
|
||||||||||
Net loss
|
$
|
(3,291,151
|
)
|
$
|
(7,600,580
|
)
|
$
|
(15,343,664
|
)
|
$
|
(29,073,388
|
)
|
||||
Net loss per share attributed to common
|
||||||||||||||||
stockholders - basic and diluted
|
$
|
(0.06
|
)
|
$
|
(0.16
|
)
|
$
|
(0.31
|
)
|
$
|
(0.61
|
)
|
||||
Weighted average common shares outstanding
|
||||||||||||||||
basic and diluted
|
51,922,210
|
47,790,697
|
49,566,050
|
47,759,985
|
||||||||||||
|
||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
Eos Petro, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Deficit
For the Nine Months Ended September 30, 2016
(unaudited)
|
||||||||||||||||||||||||
Additional
|
Stock
|
Total
|
||||||||||||||||||||||
Common Stock
|
Paid-in
|
Subscription
|
Accumulated
|
Stockholders'
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Receivable
|
Deficit
|
Deficit
|
|||||||||||||||||||
Balance, December 31, 2015
|
47,827,882
|
$
|
4,783
|
$
|
116,977,726
|
$
|
(88,200
|
)
|
$
|
(144,981,835
|
)
|
$
|
(28,087,526
|
)
|
||||||||||
Issuance of common stock for debt extension
|
315,000
|
32
|
1,249,968
|
-
|
-
|
1,250,000
|
||||||||||||||||||
Issuance of common stock in connection with amendment of note agreement
|
75,000
|
7
|
299,993
|
-
|
-
|
300,000
|
||||||||||||||||||
Issuance of common stock for services
|
200,000
|
20
|
264,980
|
-
|
-
|
265,000
|
||||||||||||||||||
Issuance of common stock in connection with notes payable
|
1,304,880
|
-
|
-
|
1,305,000
|
||||||||||||||||||||
Issuance of common stock in connection debt conversions
|
2,471,399
|
-
|
-
|
2,471,646
|
||||||||||||||||||||
Transfer of common shares owned by majority stockholder in connection with notes payable
|
-
|
-
|
290,000
|
-
|
-
|
290,000
|
||||||||||||||||||
Extension of warrant expiration date in connection with amendment of note agreement
|
-
|
-
|
188,378
|
-
|
-
|
188,378
|
||||||||||||||||||
Fair value of warrants issued for consulting services
|
-
|
-
|
1,164,738
|
-
|
-
|
1,164,738
|
||||||||||||||||||
Fair value of vested options
|
-
|
-
|
12,243,453
|
-
|
-
|
12,243,453
|
||||||||||||||||||
Fair value related to change in stock option terms
|
-
|
-
|
93,714
|
-
|
-
|
93,714
|
||||||||||||||||||
Value of warrants issued with note payable
|
-
|
-
|
186,290
|
-
|
-
|
186,290
|
||||||||||||||||||
Sale of common shares owned by majority stockholder to affiliates at discount
|
-
|
-
|
931,060
|
-
|
-
|
931,060
|
||||||||||||||||||
Reclassification of derviative liability to equity
|
-
|
-
|
1,389,628
|
-
|
-
|
1,389,628
|
||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(15,343,664
|
)
|
(15,343,664
|
)
|
||||||||||||||||
Balance, September 30, 2016
|
52,089,528
|
$
|
5,209
|
$
|
139,056,207
|
$
|
(88,200
|
)
|
$
|
(160,325,499
|
)
|
$
|
(21,352,283
|
)
|
||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
||||||||||||||||||||||||
Eos Petro, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
|
||||||||
Nine Months Ended September 30,
|
||||||||
2016
|
2015
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$
|
(15,343,664
|
)
|
$
|
(29,073,388
|
)
|
||
Adjustments to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Depletion
|
10,709
|
29,970
|
||||||
Depreciation
|
2,630
|
7,583
|
||||||
Accretion of asset retirement obligation
|
6,939
|
6,308
|
||||||
Amortization of debt discounts
|
290,841
|
-
|
||||||
Financing costs related to stock and warrants issued with notes payable
|
1,277,987
|
-
|
||||||
Fair value of stock issued for services
|
265,000
|
62,659
|
||||||
Fair value of stock issued for debt extension
|
1,250,000
|
311,250
|
||||||
Fair value of stock issued for amendment of note agreement
|
300,000
|
-
|
||||||
Fair value of warrants issued for consulting services
|
1,164,738
|
8,157,284
|
||||||
Fair value of warrants issued for amendment of note agreement
|
188,378
|
2,212,149
|
||||||
Fair value of vested options
|
12,243,453
|
4,673,412
|
||||||
Fair value related to change in stock option terms
|
93,714
|
-
|
||||||
Sale of common shares owned by majority stockholder to affiliates at discount
|
931,060
|
6,293,200
|
||||||
Termination fee
|
-
|
5,500,000
|
||||||
Structuring fee
|
-
|
4,000,000
|
||||||
Change in fair value of derivative liabilities
|
(4,991,925
|
)
|
(4,241,697
|
)
|
||||
Change in operating assets and liabilities:
|
||||||||
Other current assets
|
12,878
|
42,959
|
||||||
Accounts payable
|
762,740
|
1,047,214
|
||||||
Accrued expenses
|
653,904
|
(68,824
|
)
|
|||||
Accrued compensation - officer
|
137,752
|
90,000
|
||||||
Net cash used in operating activities
|
(742,866
|
)
|
(949,921
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Deposit for acquistion
|
(100,000
|
)
|
-
|
|||||
Net cash used in investing activities
|
(100,000
|
)
|
-
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of notes payable
|
956,810
|
150,000
|
||||||
Repayment of notes payable
|
(195,000
|
)
|
-
|
|||||
Proceeds from issuance of notes payable, related party
|
125,000
|
870,000
|
||||||
Repayment of notes payable, related party
|
(45,274
|
)
|
(201,540
|
)
|
||||
Net cash provided by financing activities
|
841,536
|
818,460
|
||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
(1,330
|
)
|
(131,461
|
)
|
||||
CASH AND CASH EQUIVALENTS, beginning of period
|
1,367
|
133,210
|
||||||
CASH AND CASH EQUIVALENTS, end of period
|
$
|
37
|
$
|
1,749
|
||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||
Cash paid for interest
|
$
|
-
|
$
|
-
|
||||
Cash paid for income taxes
|
$
|
-
|
$
|
-
|
||||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Notes payable issued for accounts payable
|
$
|
288,190
|
$
|
-
|
||||
Discount on notes payable
|
$
|
503,303
|
$
|
-
|
||||
Common stock issued for conversion of debt
|
$
|
2,471,646
|
$
|
-
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
|
September 30,
|
|||||||
|
2016
|
2015
|
||||||
Options
|
5,750,000
|
1,325,000
|
||||||
Warrants
|
9,430,734
|
16,702,992
|
||||||
Convertible notes
|
2,000,000
|
2,000,000
|
||||||
Total
|
17,180,734
|
20,027,992
|
|
·
|
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
·
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
|
·
|
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
|
September 30,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
LowCal Convertible Note
|
$
|
5,000,000
|
$
|
5,000,000
|
||||
LowCal Promissory Note
|
3,250,000
|
3,250,000
|
||||||
Total
|
$
|
8,250,000
|
$
|
8,250,000
|
|
·
|
Expected life of 2.81 to 4.14 years;
|
|
·
|
Volatility of 174%;
|
|
·
|
Dividend yield of 0%; and
|
|
·
|
Risk free interest rate of 1.16%.
|
|
September 30,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
|
||||||||
Secured note payable, at 18% (1)
|
$
|
300,000
|
$
|
600,000
|
||||
Note payable at 10%, (2)
|
653,000
|
453,000
|
||||||
Note payable, at 2%, (3)
|
100,000
|
100,000
|
||||||
Note payable at 10%, (4)
|
-
|
150,000
|
||||||
Note payable at 10%, (5)
|
130,000
|
30,000
|
||||||
Note payable at 10%, (6)
|
-
|
50,000
|
||||||
Note payable at 10%, (7)
|
100,000
|
-
|
||||||
Note payable at 10%, (8)
|
200,000
|
-
|
||||||
Note payable at 2%, (9)
|
500,000
|
-
|
||||||
Total notes payable
|
1,983,000
|
1,383,000
|
||||||
Debt discount
|
(212,462
|
)
|
-
|
|||||
|
$
|
1,770,538
|
$
|
1,383,000
|
· | Expected life of 3.0 years |
· | Volatility of 174%; |
· | Dividend yield of 0%; |
· | Risk free interest rate of 0.71% |
· | Expected life of 3.0 years |
· | Volatility of 169%; |
· | Dividend yield of 0%; |
· | Risk free interest rate of 0.80% |
|
||||||||
|
July 2,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
Exercise Price
|
$
|
1.00
|
$
|
2.00
|
||||
Stock Price
|
$
|
1.00
|
$
|
4.00
|
||||
Risk-free interest rate
|
0.59
|
%
|
1.06
|
%
|
||||
Expected life of the options (Years)
|
2.14
|
2.64
|
||||||
Expected volatility
|
169
|
%
|
180
|
%
|
||||
Expected dividend yield
|
0
|
%
|
0
|
%
|
||||
Expected forfeitures
|
0
|
%
|
0
|
%
|
||||
|
||||||||
Fair Value
|
$
|
1,389,628
|
$
|
6,381,553
|
·
|
200,000 shares of its common stock to a consultant. The shares were valued at $265,000 based on the market price of the Company's common stock at the date of issuance;
|
·
|
315,000 shares of its common stock in connection with debt extensions. The shares were valued at $1,250,000 based on the market price of the Company's common stock at the date of issuance;
|
·
|
75,000 shares of its common stock in connection with an amendment of a note agreement. The shares were valued at $300,000 based on the market price of the Company's common stock at the date of issuance;
|
·
|
1,200,000 shares of its common stock in connection with notes payable. The shares were valued at $1,305,000 based on the market price of the Company's common stock at the date of issuance; and
|
·
|
2,471,646 shares of its common stock in connection with the conversion of notes payable of $450,000; notes payable to related party of $1,287,886; accrued interest of $584,760 and accrued expenses of $149,000.
|
|
Weighted
|
|||||||||||||||
|
Weighted
|
Average
|
||||||||||||||
|
Average
|
Remaining
|
Aggregate
|
|||||||||||||
|
Number of
|
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||
|
Options
|
Price ($)
|
Life (in years)
|
Value ($)
|
||||||||||||
Outstanding, December 31, 2015
|
1,325,000
|
2.50
|
3.08
|
2,186,250
|
||||||||||||
Granted
|
4,500,000
|
1.00
|
||||||||||||||
Exercised
|
-
|
|||||||||||||||
Forfeited/Canceled
|
(75,000
|
)
|
2.50
|
|||||||||||||
Outstanding, September 30, 2016
|
5,750,000
|
1.33
|
3.88
|
-
|
||||||||||||
Exercisable, September 30, 2016
|
2,750,000
|
1.68
|
3.44
|
-
|
Options Outstanding
|
||||||||||||||
Weighted
|
Weighted
|
|||||||||||||
Average
|
Average
|
|||||||||||||
Exercise
|
Number of
|
Remaining
|
Exercise
|
|||||||||||
Price ($)
|
Shares
|
Life (Years)
|
Price ($)
|
|||||||||||
1.00
|
4,500,000
|
4.28
|
1.00
|
|||||||||||
2.50
|
1,250,000
|
2.42
|
2.50
|
Options Exercisable
|
||||||||||||||
Weighted
|
Weighted
|
|||||||||||||
Average
|
Average
|
|||||||||||||
Exercise
|
Number of
|
Remaining
|
Exercise
|
|||||||||||
Price ($)
|
Shares
|
Life (Years)
|
Price ($)
|
|||||||||||
1.00
|
1,500,000
|
4.28
|
1.00
|
|||||||||||
2.50
|
1,250,000
|
2.42
|
2.50
|
· | Expected life of 5.0 years; |
· | Volatility of 179%; |
· | Dividend yield of 0%; and |
· | Risk free interest rate of 1.58%. |
|
Weighted
|
|||||||||||||||
|
Weighted
|
Average
|
||||||||||||||
|
Average
|
Remaining
|
Aggregate
|
|||||||||||||
|
Number of
|
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||
|
Warrants
|
Price ($)
|
Life (in years)
|
Value ($)
|
||||||||||||
Outstanding, December 31, 2015
|
8,612,992
|
3.25
|
2.66
|
11,237,988
|
||||||||||||
Granted
|
817,742
|
1.70
|
||||||||||||||
Exercised
|
-
|
|||||||||||||||
Forfeited/Canceled
|
-
|
|||||||||||||||
Outstanding, September 30, 2016
|
9,430,734
|
2.93
|
2.15
|
-
|
||||||||||||
Exercisable, September 30, 2016
|
9,430,734
|
2.93
|
2.15
|
-
|
Warrants Outstanding and Exercisable
|
||||||||||||||
Weighted
|
Weighted
|
|||||||||||||
Average
|
Average
|
|||||||||||||
Exercise
|
Number of
|
Remaining
|
Exercise
|
|||||||||||
Price ($)
|
Shares
|
Life (Years)
|
Price ($)
|
|||||||||||
1.00
|
2,175,000
|
2.09
|
1.00
|
|||||||||||
2.00
|
1,100,000
|
3.05
|
2.00
|
|||||||||||
2.50
|
3,207,734
|
2.86
|
2.50
|
|||||||||||
3.00
|
1,353,000
|
0.24
|
3.00
|
|||||||||||
4.00
|
75,000
|
1.84
|
4.00
|
|||||||||||
6.00
|
20,000
|
0.58
|
6.00
|
|||||||||||
7.15
|
1,500,000
|
1.78
|
7.15
|
|||||||||||
9,430,734
|
· | Expected life of 5.0 years |
· | Volatility of 171%-176%; |
· | Dividend yield of 0%; |
· | Risk free interest rate of 1.21% - 1.39% |
|
For the Three Months Ended September 30,
|
|||||||||||||||||||||||
|
2016
|
2015
|
||||||||||||||||||||||
|
% of
|
% of
|
Dollar
|
Percentage
|
||||||||||||||||||||
|
Amount
|
Revenue
|
Amount
|
Revenue
|
change
|
Change
|
||||||||||||||||||
Revenue
|
$
|
-
|
N/A
|
$
|
39,863
|
100.0
|
%
|
(39,863
|
)
|
-100.0
|
%
|
|||||||||||||
Lease operating expense
|
13,164
|
N/A
|
39,131
|
98.2
|
%
|
(25,967
|
)
|
-66.4
|
%
|
|||||||||||||||
General and administrative expenses
|
2,715,084
|
N/A
|
3,238,923
|
8125.1
|
%
|
(523,839
|
)
|
-16.2
|
%
|
|||||||||||||||
Other income (expense), net
|
(562,903
|
)
|
N/A
|
(4,362,389
|
)
|
-10943.5
|
%
|
3,799,486
|
-87.1
|
%
|
||||||||||||||
Net loss
|
$
|
(3,291,151
|
)
|
N/A
|
$
|
(7,600,580
|
)
|
-5803.8
|
%
|
4,309,429
|
-56.7
|
%
|
|
For the Nine Months Ended September 30,
|
|||||||||||||||||||||||
|
2016
|
2015
|
||||||||||||||||||||||
|
% of
|
% of
|
Dollar
|
Percentage
|
||||||||||||||||||||
|
Amount
|
Revenue
|
Amount
|
Revenue
|
change
|
Change
|
||||||||||||||||||
Revenue
|
$
|
36,519
|
100.0
|
%
|
$
|
170,822
|
100.0
|
%
|
(134,303
|
)
|
-78.6
|
%
|
||||||||||||
Lease operating expense
|
55,493
|
152.0
|
%
|
103,788
|
60.8
|
%
|
(48,295
|
)
|
-46.5
|
%
|
||||||||||||||
General and administrative expenses
|
16,428,317
|
44985.7
|
%
|
20,823,143
|
12190.0
|
%
|
(4,394,826
|
)
|
-21.1
|
%
|
||||||||||||||
Structuring fee
|
-
|
0.0
|
%
|
4,000,000
|
2341.6
|
%
|
(4,000,000
|
)
|
N/A
|
|||||||||||||||
Termination fee
|
-
|
0.0
|
%
|
5,500,000
|
3219.7
|
%
|
(5,500,000
|
)
|
N/A
|
|||||||||||||||
Other income (expense), net
|
1,103,627
|
3022.1
|
%
|
1,182,721
|
692.4
|
%
|
(79,094
|
)
|
-6.7
|
%
|
||||||||||||||
Net loss
|
$
|
(15,343,664
|
)
|
-42015.6
|
%
|
$
|
(29,073,388
|
)
|
-17019.7
|
%
|
13,729,724
|
-47.2
|
%
|
·
|
$8,250,000 in convertible and promissory notes payable to LowCal. These loans were due on May 1, 2016 and are currently past due and in default;
|
·
|
$1,983,000 in notes payable due to eight note holders. These notes bear interest ranging from 2% to 18% and have maturity dates ranging from April 30, 2016 to February 5, 2017; and
|
·
|
Lack of an independent audit committee;
|
·
|
Lack of formal approval policies by the Board of Directors;
|
·
|
Lack of adequate oversight over individuals responsible for certain key control activities;
|
·
|
Insufficient number of personnel appropriately qualified to perform control monitoring activities, including the recognition of risks and complexities of its business operations;
|
·
|
An insufficient number of personnel with an appropriate level of GAAP knowledge and experience or training in the application of GAAP commensurate with the Company's financial reporting requirements.
|
EXHIBIT TABLE
The following is a complete list of exhibits filed as part of the Quarterly Report on Form 10-Q, some of which are incorporated herein by reference from the reports, registration statements and other filings of the issuer with the Securities and Exchange Commission, as referenced below:
|
|
|
|
Reference
Number
|
Item
|
31.1
|
Section 302 Certification of Principal Executive Officer.*
|
31.2
|
Section 302 Certification of Principal Financial Officer.*
|
32.1
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.*
|
32.2
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.*
|
101.INS
|
XBRL Instance Document.*
|
101.SCH
|
XBRL Taxonomy Extension Schema Document*
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document*
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document*
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document*
|
|
EOS PETRO, INC.
a Nevada corporation
|
|
|
|
|
Date: November 14, 2016
|
By:
|
/s/ MARTIN B. ORING
|
|
|
Martin B. Oring
|
|
|
Chief Executive Officer
|
Date: November 14, 2016
|
By:
|
/s/ NIKOLAS KONSTANT
|
|
|
Nikolas Konstant
|
|
|
Chairman of the Board and Chief Financial Officer
|
Dated: November 14, 2016
|
|
/s/ Martin B. Oring
|
Dated: November 14, 2016
|
|
/s/ Nikolas Konstant
|
Dated: November 14, 2016
|
|
/s/ Martin B. Oring
|
Dated: November 14, 2016
|
|
/s/ Nikolas Konstant
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 12, 2016 |
|
Document and Entity Information: | ||
Entity Registrant Name | Eos Petro, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Entity Central Index Key | 0001419583 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 52,089,528 | |
Entity Filer Category | Accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | eopt |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Oil and gas properties, accumulated depletion | $ 197,906 | $ 187,197 |
Other property plant and equipment, accumulated depreciation | 29,862 | 27,232 |
Note Payable, discount | $ 212,462 | $ 0 |
Common Stock, Par Value | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 300,000,000 | 300,000,000 |
Common Stock, Shares Issued | 52,089,528 | 47,827,882 |
Common Stock, Shares Outstanding | 52,089,528 | 47,827,882 |
Series B Preferred Stock | ||
Preferred Stock, Par Value | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 44,000,000 | 44,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Condensed Consolidated Statements of Operations - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenues | ||||
Oil and gas sales | $ 39,863 | $ 36,519 | $ 170,822 | |
Costs and expenses | ||||
Lease operating expense | 13,164 | 39,131 | 55,493 | 103,788 |
General and administrative | 2,715,084 | 3,238,923 | 16,428,317 | 20,823,143 |
Structuring fee | 4,000,000 | |||
Acquisition termination fee | 5,500,000 | |||
Total costs and expenses | 2,728,248 | 3,278,054 | 16,483,810 | 30,426,931 |
Loss from operations | (2,728,248) | (3,238,191) | (16,447,291) | (30,256,109) |
Other income (expense) | ||||
Interest and finance costs | (449,063) | (2,667,186) | (3,888,298) | (3,058,976) |
Change in fair value of derivative liabilities | (113,840) | (1,695,203) | 4,991,925 | 4,241,697 |
Total other income (expense) | (562,903) | (4,362,389) | 1,103,627 | 1,182,721 |
Net loss | $ (3,291,151) | $ (7,600,580) | $ (15,343,664) | $ (29,073,388) |
Net loss per share attributed to common stockholders - basic and diluted | $ (0.06) | $ (0.16) | $ (0.31) | $ (0.61) |
Weighted average common shares outstanding basic and diluted | 51,922,210 | 47,790,697 | 49,566,050 | 47,759,985 |
Note 1 - Organization |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Disclosure Text Block [Abstract] | |
Note 1 - Organization | NOTE 1 - ORGANIZATION
Organization and Business
The Company was organized under the laws of the state of Nevada in 2007. On October 12, 2012, pursuant to the Merger Agreement entered into by and between the Company, Eos Global Petro, Inc. ("Eos"), and Eos Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company ("Company Merger Sub"), dated July 16, 2012, Company Merger Sub merged into Eos, with Eos being the surviving entity and the Company the legal acquirer (the "Merger"). As a result of the Merger, Eos became a wholly-owned subsidiary of the Company.
Effective as of May 20, 2013, the Company changed its name to Eos Petro, Inc. (it previously had been named "Cellteck, Inc.").
The Company has two wholly-owned subsidiaries, Eos and Eos Merger Sub, Inc., a Delaware corporation ("Eos Delaware"), which was formed as an acquisition vehicle for potential transactions. Eos itself also has two subsidiaries: Plethora Energy, Inc., a Delaware corporation and a wholly-owned subsidiary of Eos ("Plethora Energy"), and EOS Atlantic Oil & Gas Ltd., a Ghanaian corporation ("EAOG"), which is also 10% owned by one of the Company's Ghanaian-based third party consultants. Plethora Energy also owns 90% of Plethora Bay Oil & Gas Ltd., a Ghanaian corporation ("PBOG"), which is also 10% owned by the same Ghanaian-based consultant. Eos, Eos Delaware, PBOG, Plethora Energy and EAOG are collectively referred to as the Company's "Subsidiaries."
Business
The Company is in the business of acquiring, exploring and developing oil and gas-related assets.
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared by Eos Petro, Inc. (the "Company"), pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the financial condition of the Company and its operating results for the respective periods. The condensed consolidated balance sheet at December 31, 2015 has been derived from the Company's audited consolidated financial statements. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission. The results for the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year ending December 31, 2016.
Going Concern
The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2016 and December 31, 2015, the Company had a stockholders' deficit of $21,352,283 and $28,087,526, respectively; for the nine months ended September 30, 2016 and for the year ended December 31, 2015, reported a net loss of $15,343,664 and $35,453,024, respectively; and had negative cash flows from operating activities of $742,866 and $1,420,003, respectively. In addition, the Company may have become obligated to pay a $5.5 million termination fee under the "Dune Merger Agreement," as defined in Note 9 below (the "Parent Termination Fee," as more fully defined in the Dune Merger Agreement) (see Note 9) and $4 million that may be due under a structuring fee with GEM Global Yield Fund ("GEM"). Furthermore, $8,250,000 of LowCal Convertible and Promissory Notes became due on May 1, 2016 and are therefore now due and payable. Management estimates the Company's capital requirements for the next twelve months, including drilling and completing wells for the Company's oil and gas "Works Property" located in Illinois and possible acquisitions, will total approximately $2,500,000, excluding any amounts that may be due to Dune Energy, Inc. under the Dune Merger Agreement or a $4 million structuring fee that may be due to GEM. Errors may be made in predicting and reacting to relevant business trends and the Company will be subject to the risks, uncertainties and difficulties frequently encountered by early-stage companies. The Company may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause the Company's business, results of operations, and financial condition to suffer. As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern. In addition, the Company's independent registered public accounting firm, in its report on the Company's December 31, 2015 consolidated financial statements, has raised substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty.
The Company's ability to continue as a going concern is an issue due to its net losses and negative cash flows from operations, and its need for additional financing to fund future operations. The Company's ability to continue as a going concern is subject to its ability to obtain necessary funding from outside sources, including the sale of its securities or obtaining loans from investors or financial institutions. There can be no assurance that such funds, if available, can be obtained on terms reasonable to the Company. Any debt financing or other financing of securities senior to common stock that the Company is able to obtain will likely include financial and other covenants that will restrict the Company's flexibility. At a minimum, the Company expects these covenants to include restrictions on its ability to pay dividends on its common stock in the case of debt financing, or cause substantial dilution for stockholders in the case of convertible debt and equity financing. Any failure to comply with these covenants would have a material adverse effect on the Company's business, prospects, financial condition, results of operations and cash flows. |
Note 2 - Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 2 - Summary of Significant Accounting Policies | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements include the accounts of our wholly owned and majority owned subsidiaries. Intercompany transactions and balances have been eliminated. Management evaluates its investments on an individual basis for purposes of determining whether or not consolidation is appropriate.
Basic and Diluted Earnings (Loss) Per Share
Earnings per share is calculated in accordance with the ASC 260-10, Earnings Per Share. Basic earnings-per-share is based upon the weighted average number of common shares outstanding. Diluted earnings-per-share is based on the assumption that all dilutive convertible notes, stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates reflected in the consolidated financial statements include, but are not limited to, amortization and depletion allowances, the recoverability of the carrying amount and estimated useful lives of long-lived assets, asset retirement obligations, the valuation of equity instruments issued in connection with financing transactions and share-based compensation, and assumptions used in valuing derivative liabilities. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates.
Full Cost Method of Accounting for Oil and Gas Properties
The Company has elected to utilize the full cost method of accounting for its oil and gas activities. In accordance with the full cost method of accounting, the Company capitalizes all costs associated with acquisition, exploration and development of oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool on a country by country basis. Capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves once proved reserves are determined to exist.
Capitalized oil and gas property costs within a cost center are amortized on an equivalent unit-of-production method. The equivalent unit-of-production rate is computed on a quarterly basis by dividing production by proved oil and gas reserves at the beginning of the quarter then applying such amount to capitalized oil and gas property costs, which includes estimated asset retirement costs, less accumulated amortization, plus the estimated future expenditures (based on current costs) to be incurred in developing proved reserves, net of estimated salvage values.
Full Cost Ceiling Test
Oil and gas properties without estimated proved reserves are not amortized until proved reserves associated with the properties can be determined or until impairment occurs. At the end of each reporting period, the unamortized costs of oil and gas properties are subject to a "ceiling test" which limits capitalized costs to the sum of the estimated future net revenues from proved reserves, discounted at 10% per annum to present value, based on current economic and operating conditions, adjusted for related income tax effects. If the net capitalized costs exceed the cost center ceiling, the excess is recognized as an impairment of oil and gas properties. An impairment recognized in one period may not be reversed in a subsequent period even if higher oil and gas prices increase the cost center ceiling applicable to the subsequent period.
The estimated future net revenues used in the ceiling test are calculated using average quoted market prices for sales of oil and gas on the first calendar day of each month during the preceding 12-month period prior to the end of the current reporting period. Prices are held constant indefinitely and are not changed except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts. Prices used in the ceiling test computation do not include the impact of derivative instruments because the Company elected not to meet the criteria to qualify its derivative instruments for hedge accounting treatment.
The Company assesses oil and gas properties at least quarterly to ascertain whether impairment has occurred. In assessing impairment, the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data. Through September 30, 2016, the Company has not experienced any impairment of its capitalized oil and gas properties.
The Company recorded depletion expense of $10,709 and $29,970 for the nine months ended September 30, 2016 and 2015, respectively.
Proceeds from the sale of oil and gas properties are recognized as a reduction of capitalized oil and gas property costs with no gain or loss recognized, unless the sale significantly alters the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. Through September 30, 2016, the Company has not had any sales of oil and gas properties that significantly alter that relationship.
Asset Retirement Obligation
The Company accounts for its future asset retirement obligations ("ARO") by recording the fair value of the liability during the period in which it was incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The increase in carrying value of a property associated with the capitalization of an ARO is included in proven oil and gas properties in the balance sheets. The ARO consists of costs related to the plugging of wells, removal of facilities and equipment, and site restoration on its oil and gas properties. The asset retirement liability is accreted to operating expense over the useful life of the related asset. As of September 30, 2016 and December 31, 2015, the Company had an ARO of $99,451 and $92,512, respectively.
Oil and Gas Revenue
Revenues are recognized when hydrocarbons have been delivered, the customer has taken title and collection is reasonably assured.
Share-Based Compensation
The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of share-based payment awards to employees and directors on the date of grant using an option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in the Company's Statements of Operations. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance where the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.
Fair Value Measurements
The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents and current liabilities, including notes payable and convertible notes, each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The Company uses Level 2 inputs for its valuation methodology for the warrant derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company's derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
Concentrations
The Company maintains cash balances at a bank in California. The account is insured by the Federal Deposit Insurance Corporation up to $250,000 per institution. At September 30, 2016 and December 31, 2015, the Company did not have amounts on deposit that exceeded the FDIC-insured limits.
The future results of the Company's oil and natural gas operations will be affected by the market prices of oil and natural gas. The availability of a ready market for oil and natural gas products in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of oil, natural gas and liquid products, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty.
One customer accounts for 100% of oil sales for the nine months ended September 30, 2016 and 2015. The Company's oil and gas properties are located in Illinois.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company uses a probability weighted average Black-Scholes-Merton model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company's financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company's financial statements and disclosures.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share Based Payment Accounting, to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its consolidated financial statements.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2014-15 on the Company's financial statements and disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements. |
Note 3 - LowCal Convertible and Promissory Notes Payable |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 3 - LowCal Convertible and Promissory Notes Payable | NOTE 3 - LOWCAL CONVERTIBLE AND PROMISSORY NOTES PAYABLE
LowCal convertible and promissory notes payable at September 30, 2016 and December 31, 2015 are as follows:
On February 8, 2013, and as subsequently amended through August 14, 2015, the Company and Eos entered into: (i) a Loan Agreement and Secured Promissory Note; (ii) a Lock-Up/Leak-Out Agreement; (iii) a Guaranty; (iv) a Series B Convertible Preferred Stock Purchase Agreement; and (v) a Leasehold Mortgage, Assignment, Security Agreement and Fixture Filing (collectively referred to as the "Loan Agreements"), with LowCal Industries, LLC and LowCal [EOS/Petro], LLC (collectively referred to as " LowCal "). Pursuant to the Loan Agreements, LowCal agreed to purchase from Eos, for $4,980,000, promissory notes in the aggregate principal amount of $5,000,000 (of which $1,500,000 was advanced in 2014 and $3,500,000 in prior years), with interest at 10% per annum (the "LowCal Loan"). At LowCal's option, LowCal can elect to convert any part of the principal of the LowCal Loan into shares of the Company's common stock at a conversion price of $2.50 per share. On January 13, 2015, the Company and LowCal amended the Loan Agreements, including the LowCal Loan, and entered into a new unsecured promissory note in the principal amount of $3,250,000, with interest at 10% per annum (the "Second LowCal Note"), $750,000 of which was advanced to the Company in 2014 and was recognized as included in the principal amount of the Second LowCal Note. As part of the amendment, LowCal forgave approximately $667,000 of accrued interest on the LowCal Loan and eliminated all interest on the LowCal Loan going forward. As amended, there was no remaining accrued and outstanding interest on the LowCal Loan.
The LowCal Loan is secured by: (i) a mortgage, lien on, assignment of and security interest in and to oil and gas properties; (ii) a guaranty by the Company as a primary obligor for payment of Eos' obligations when due; and (iii) a first priority position or call right for an amount equal to the then outstanding principal balance of and accrued interest on the LowCal Loan on the first draw down by either Eos or the Company from a commitment letter entered into with a prospective investor, should the Company or Eos be in a position to draw on this facility.
As amended, the maturity dates of both the LowCal Loan and the Second LowCal Note are May 1, 2016. The LowCal Loan and the Second LowCal Note are currently in default. The Second LowCal Note must also be repaid upon the earlier to occur of: (i) the Company closing certain potential acquisition transactions, or (ii) the Company closing a financing for a minimum of $20,000,000. The parties have agreed that, upon repayment in full of the Second LowCal Note, LowCal will forever release, cancel and terminate all of its mortgages and any other liens against the Company.
On March 11, 2016, the Company and LowCal amended the LowCal Agreements (the "Seventh Amendment to the LowCal Agreements"). Under the Seventh Amendment to the LowCal Agreements: (i) the maturity dates of the LowCal Loan and Second LowCal Note was extended to May 1, 2016; (ii) the expiration date of LowCal's warrants was extended to May 1, 2020; (iii) the Company will issue to LowCal [EOS/PETRO], LLC ("LowCal") an additional 75,000 restricted shares of the Company's common stock; and (iv) the parties agreed that if: (1) the Company pays off the $3,250,000 principal balance of the Second LowCal Note in full, plus any accrued and unpaid interest, and (2) either: (A) the Company closes a transaction where it acquires at least $10,000,000 in additional assets, through an asset purchase, stock purchase, merger, or other similar transaction, which shall be determined by generally accepted accounting principles, or (B) the Company successfully uplists its common stock to a national exchange market (NASDAQ or the New York Stock Exchange), then the following will automatically occur: (1) the conversion price of the LowCal Loan will be reduced from $2.50 per share to $2.00 per share, and (2) any outstanding principal and interest due on the LowCal Loan will be converted at a price of $2.00 per share into restricted shares of the Company's common stock, which shall be issued to LowCal.
The value of the 75,000 shares issued with the Seventh Amendment to the LowCal Agreements was $300,000 which was the fair value of the shares on March 11, 2016. The $300,000 was charged to financing cost during the nine months ended September 30, 2016. In addition, the Company took a charge to earnings of $188,378 during the nine months ended September 30, 2016 related to the extension of the expiration date of 1,000,000 warrants previously issued to LowCal. The charge is the difference in fair value of the warrants using the old expiration date and the new expiration date using the Black-Scholes option- pricing model for options with the following assumptions:
|
Note 4 - Notes Payable |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 4 - Notes Payable | NOTE 4 – NOTES PAYABLE
Notes payable at September 30, 2016 and December 31, 2015 are as follows:
(1) On February 16, 2012, and as amended through January 1, 2016, Eos entered into a Secured Promissory Note with Vatsala Sharma ("Sharma") for a secured loan for $600,000 at an interest rate of 18% per annum (as amended, the "Sharma Loan"). The Sharma Loan is secured by a blanket security interest in all of Eos' assets, and newly acquired assets, a mortgage on the Works Property, a 50% security interest in Nikolas Konstant's personal residence, and his personally held shares in a non-affiliated public corporation. As amended, the maturity date of the Sharma Loan is January 15, 2017. As additional consideration for entering into the Sharma Loan, the Company issued 400,000 shares of common stock. Under the terms of the Sharma Loan, Sharma will receive an additional 275,000 shares of the Company's common stock as of January 1, 2016. The value of the 275,000 shares issued to Sharma was $1,100,000, which was the fair value of the shares on January 1, 2016. Such amount was charged to financing cost during the nine months ended September 30, 2016. During the nine months ended September 30, 2016, $300,000 of this note plus $456,460 of accrued interest was converted into 756,460 shares of the Company's common stock.
(2) On September 30, 2014, the Company issued an unsecured promissory note to Bacchus Investors, LLC ("Bacchus") for $323,000, with interest at 4%. During 2015, the Company issued $130,000 of additional unsecured promissory notes to Bacchus with interest at 10%. In addition, in 2016, the Company issued additional unsecured promissory notes of $200,000 to Bacchus with interest at 10% for a total outstanding of $653,000 at September 30, 2016. The unsecured promissory notes are due upon demand.
(3) On October 9, 2014, the Company issued an unsecured promissory note to Ridelinks, Inc. for $200,000, with interest at 2% and a maturity date of March 15, 2015 that was extended to June 15, 2015 and includes an exit fee of $30,000. The maturity date has subsequently been extended to April 30, 2016. In consideration for extending the due date of this note per an agreement dated March 25, 2016, the Company issued to Ridelinks 40,000 shares of the Company's common stock. The value of the 40,000 shares issued to Ridelinks was $150,000 which was the fair value of the shares on March 26, 2016. The $150,000 was charged to financing cost during the nine months ended September 30, 2016. This note is currently in default.
(4) On April 15, 2015, the Company issued an unsecured promissory note to Clearview Partners II, LLC ("Clearview") for $150,000, with interest at 10%. The Company and Clearview executed letter agreements extending the maturity date of the unsecured promissory note to July 1, 2016. During the nine months ended September 30, 2016, this note plus $18,205 of accrued interest was converted into 168,205 shares of the Company's common stock.
(5) Unsecured promissory notes, with interest ranging from 4% to 5% per annum, maturing through January 1, 2017.
(6) On December 14, 2015, the Company issued an unsecured promissory note to an individual for $50,000, with interest at 10% and a maturity date of July 1, 2016. On January 20, 2016, the Company issued an additional unsecured promissory note to this individual for $50,000, with interest at 10% and a maturity date of July 1, 2016. As of September 30, 2016, the total of $100,000 has fully been repaid.
(7) On February 18, 2016, the Company issued an unsecured promissory note in settlement of accounts payable of $120,000, with interest at 10%. $20,000 had been repaid on the note with the remaining principal due on January 15, 2017.
(8) On June 27, 2016, the Company issued a secured promissory note to an investor for $200,000, with interest at 10% and a maturity date of October 31, 2016, which was extended to December 15, 2016. This note is secured by 1,000,000 shares of common stock owned by the Company's majority stockholder, Plethora Enterprises, LLC ("Plethora"), In connection with this promissory note, the Company also issued to the investor 200,000 warrants to purchase shares of the Company's common stock with an exercise price of $1.00 per share with a fair value of $173,787 and 300,000 shares of the Company's common stock valued at $300,000.
The fair values of the warrants were determined using the Black-Scholes option pricing model with the following assumptions:
The aggregate relative fair value of the warrants were valued at $92,987 and was recorded as a discount on the promissory note and as additional paid in capital. The value of the common stock of $300,000 first recorded as a discount of $107,013, with the balance of $192,987 was charged to financing costs. The combined total discount is $200,000, and will be amortized over the term of the note.
(9) On August 10, 2016, the Company issued a secured promissory note to an investor for $500,000, with interest at 2% and a maturity date of February 5, 2017. This note is secured by 2,000,000 shares of common stock owned by the Company's majority stockholder, Plethora, and real property owned by an unrelated party. The note also provides for a loan fee of $75,000 to be paid upon maturity. In connection with this promissory note, the Company also issued to the investor 150,000 warrants to purchase shares of the Company's common stock with an exercise price of $1.00 per share with a fair value of $114,708 and 150,000 shares of the Company's common stock valued at $135,000.
The fair values of the warrants were determined using the Black-Scholes option pricing model with the following assumptions:
The aggregate relative fair value of the warrants were valued at $93,303 and was recorded as a discount on the promissory note and as additional paid in capital. The value of the common stock of $135,000 was also recorded as a discount on the promissory note. The combined total discount is $228,303 and will be amortized over the term of the note.
On May 19, 2016, the Company issued two secured promissory notes for $37,500 each, with interest at 1% and a maturity date of July 6, 2016. In connection with these promissory notes, the Company also issued to the noteholders 750,000 shares of the Company's common stock valued at $870,000. In addition, for one note, Plethora, the Company's majority stockholder, issued the noteholder 250,000 shares of the Company's common stock valued at $290,000. The value of the common stock was based on the closing stock price on the date of the agreements and was recorded as a discount of $75,000 and the reminder of $1,085,000 was charged to financing costs. The discount of $75,000 was amortized over the term of the notes. During the quarter ended September 30, 2016, these notes were fully repaid.
During nine months ended September 30, 2016, the Company recorded valuation discount of $503,303 and recognized amortization of debt discounts of $290,841 which is included in interest expense in the accompanying consolidated statement of operations. As of September 30, 2016, the unamortized valuation discount was $212,462.
The weighted average interest rate at September 30, 2016 for the outstanding notes payable is 8.4% |
Note 5 - Notes Payable, Related Party |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Disclosure Text Block [Abstract] | |
Note 5 - Notes Payable, Related Party | NOTE 5 – NOTES PAYABLE, RELATED PARTY
The Company has been receiving advances from Plethora, a company wholly owned by Nickolas Konstant, the Company's majority shareholder and CEO. All of the loans extended by Plethora to the Company accrue interest at an annual rate of 10%, and are due on July 1, 2016. At December 31, 2015, the aggregate principal balance due under these notes was $1,208,160.
During the nine months ended September 30, 2016 and 2015, Plethora sold an aggregate of 351,515 and 2,520,000 of its shares of the Company's restricted common stock in private sales. Following the private sales transactions, Plethora loaned all of the aggregate proceeds from the private sale of stock of to the Company, and concurrently, the Company issued Plethora separate unsecured promissory notes for the aggregate principal amount received. The proceeds from these sales of $125,000 and $870,000 were loaned to the Company.
During the nine months ended September 30, 2016 and 2015, of the shares of common stock sold by Plethora as discussed above, 251,515 and 2,160,000 shares were sold to either affiliates of the Company, vendors, or individuals with whom the Company had a past business relationship. The Company considered the provisions of Staff Accounting Bulletin ("SAB") Topic 5T, Accounting for Expenses or Liabilities Paid by Principal Stockholders, and determined that the difference between the quoted market price of the shares and the sales price to the buyers as additional compensation cost and a contribution to capital by a major related party stockholder (Plethora). As such, the Company recorded charges of $931,060 and $6,293,200 during the nine months ended September 30, 2016 and 2015 relating to the difference between the sales price and the fair market price of the shares on the date of the transaction.
During the quarter ended September 30, 2016, the entire balance due on this note payable of $1,287,886 and accrued interest of $110,095 were converted into 1,397,981 shares of the Company's common stock. The balance of the notes payable, related party at September 30, 2016 was $0. |
Note 6 - Derivative Liabilities |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 - Derivative Liabilities | NOTE 6 – DERIVATIVE LIABILITIES
Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity's own stock, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. In August 2014, the Company issued warrants to purchase an aggregate of 1,775,000 shares of the Company's common stock, to a former note holder and certain other related parties. The warrant agreements included an anti-dilution provision that would reduce the exercise price if the Company were to issue additional equities at a price below the exercise price which is in effect at the time of the issuance of the additional equities. The Company determined that these warrants met the definition of a derivative and are to be re-measured at the end of each reporting period with the change in fair value reported in the statement of operations. On July 2, 2016, the Company and the warrant holders entered into an agreement whereby the Company agreed to reduce the exercise price of the warrants to $1.00 in exchange for the warrant holder removing the anti-dilution provision contained in the warrant agreements. As a result of the removal of this anti-dilution provision, these warrants are no longer considered derivative liabilities. On July 2, 2016, the fair value of the warrants of $1,389,628 was reclassified to additional paid-in capital.
As of July 2, 2016 and December 31, 2015, the derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following assumptions:
The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the warrants was determined by the expiration dates of the warrants. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.
The Company recorded an adjustment to the fair value of derivative liabilities of $4,991,925 and $4,241,697 for nine months ended September 30, 2016 and 2015, respectively. |
Note 7 - Related Party Transactions |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Disclosure Text Block [Abstract] | |
Note 7 - Related Party Transactions | NOTE 7 - RELATED PARTY TRANSACTIONS
Plethora Enterprises, LLC
The Company has a consulting agreement with Plethora, which is solely owned by Nikolas Konstant, the Company's Chairman of the Board and Chief Financial Officer. Under the consulting agreement, for the nine months ended September 30, 2016 and 2015, the Company recorded compensation expense of $270,000 and $270,000, respectively. At September 30, 2016 and December 31, 2015, there was $317,752 and $180,000, respectively, due to Mr. Konstant under the Plethora consulting agreement.
In addition, Plethora has made advances to the Company as described in Note 5. |
Note 8- Stockholders' Deficit |
9 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||
Disclosure Text Block [Abstract] | |||||||||||
Note 8- Stockholders' Deficit | NOTE 8- STOCKHOLDERS' DEFICIT
During the nine months ended the Company issued:
|
Note 9 - Stock Options and Warrants |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 9 - Stock Options and Warrants | NOTE 9 - STOCK OPTIONS AND WARRANTS
Option Activity
A summary of the option activity is presented below:
At September 30, 2016, the intrinsic value of outstanding and exercisable stock options was zero.
The following table summarizes information about options outstanding at September 30, 2016:
The following table summarizes information about options exercisable at September 30, 2016:
In connection with Mr. Alan Gaines' employment as the Company's President, the Company and Mr. Gaines entered into a Stock Option Agreement, signed on December 16, 2015 and effective January 11, 2016 ("Effective Date"), whereby the Company granted Mr. Gaines options to purchase up 4,500,000 shares of the Company's restricted common stock, all of which have an exercise price of $1.00 per share and expire in five years. The Company determined the total fair value at grant date was $17,627,047, calculated using the Black-Scholes option pricing model. The options vest as follows: 1,500,000 of the shares vested on the Effective Date; 1,500,000 of the shares shall vest on the first anniversary of the Effective Date; and 1,500,000 of the shares shall vest on the second anniversary of the Effective Date.
The assumptions used in calculating the fair value of options granted using the Black-Scholes option pricing model for options are as follows:
During the nine months ended September 30, 2016 and 2015, the Company recorded $12,243,453 and $4,673,412, respectively, of share based compensation relating to the vesting of options granted in 2016 and other previously granted options. As of September 30, 2016, the unamortized balance related to future stock based compensation for options previously granted but not vested is $5,383,594.
During the nine months ended September 30, 2016, the Company extended the terms of 50,000 option by five years. The change in fair value between the fair value of the options using the old expiration date and the new expiration date was $93,714. This amount was recorded as an expense during the period as the options have fully vested.
Warrant Activity
A summary of warrant activity is presented below:
At September 30, 2016, the intrinsic value of outstanding and exercisable stock warrants was zero.
The following tables summarize information about warrants outstanding and exercisable at September 30, 2016:
Warrants issued to consultants
During the nine months ended September 30, 2016, the Company issued a total of 467,742 warrants to two consultants and the CEO with an aggregate fair value of $1,164,738 which was recorded as expense during the nine months ended September 30, 2016. The fair values of the warrants were determined using the Black-Scholes option pricing model with the following assumptions:
|
Note 10 - Commitments and Contingencies |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Disclosure Text Block [Abstract] | |
Note 10 - Commitments and Contingencies | NOTE 10 - COMMITMENTS AND CONTINGENCIES
Dune Merger Agreement
On September 17, 2014 the Company entered into an Agreement and Plan of Merger with Dune Energy Inc. ("Dune") and Eos Delaware, dated as of September 16, 2014, as subsequently amended (the "Dune Merger Agreement"), and on the terms and subject to the conditions described therein, Eos Delaware agreed to conduct a cash tender offer to purchase all of Dune's issued and outstanding shares of common stock at a price of $0.30 per share in cash, without interest, upon the terms and conditions set forth in the Dune Merger Agreement.
Due to the severe decline in oil prices, the Company's sources of capital for the merger and tender offer were withdrawn, and the Company was unable to complete the merger and tender described in the Dune Merger Agreement on the terms originally negotiated. After a series of amendments to the Dune Merger Agreement while the parties continued to try to negotiate financing terms, the tender offer ultimately expired on February 27, 2015.
Subsequently, on March 4, 2015, Dune provided the Company with notice of its decision to terminate the Dune Merger Agreement in accordance with the terms thereof, and demanded the Parent Termination Fee (as defined in the Dune Merger Agreement) of $5,500,000 in cash, and reimbursement for certain unidentified expenses incurred by Dune. Dune has threatened to bring litigation to collect these amounts in connection with its contention that the Company breached the Dune Merger Agreement and is entitled to the Parent Termination Fee. The Company has accordingly recorded a liability for $5,500,000 related to the Parent Termination Fee. No lawsuit has been filed to date against the Company for the Parent Termination Fee, and the Company would vigorously defend itself, should any action ever be brought. The Company believes that it has equitable and legal defenses against payment of all or a portion of the Parent Termination Fee.
GEM Global Yield Fund
Pursuant to the financing commitment, dated August 31, 2011, and the Common Stock Purchase Agreement and Registration Rights Agreement, both dated as of July 11, 2013, entered into between the Company and GEM (collectively referred to as the "Commitment Agreements"), the Company was required to use commercially reasonable efforts to uplist to the NYSE, NASDAQ or AMEX stock exchange within 270 days of July 11, 2013, and then to file a registration statement covering the shares and warrants referenced in the Commitment Agreements within 30 days of uplisting. The Company further agreed to pay to GEM a structuring fee equal to $4 million, which was to be paid on the 18 month anniversary of July 11, 2013 regardless of whether the Company had drawn down from the Commitment at that time. At the Company's election, the Company may elect to pay the structuring fee in registered shares of its common stock of the Company at a per share price equal to 90% of the average closing trading price of the Company's common stock for the thirty-day period immediately prior to the 18-month anniversary of July 11, 2013. As of January 11, 2015, the 18-month anniversary date of the agreement, the Company had not met this requirement and may now become liable for payment of this structuring fee to GEM. As of December 31, 2015, the Company has recorded an accrued structuring fee of $4 million. |
Note 11- Subsequent Events |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Disclosure Text Block [Abstract] | |
Note 11- Subsequent Events | NOTE 11– SUBSEQUENT EVENTS
Subsequent to September 30, 2016, the Company made an additional deposit of $50,000 for a potential acquisition. |
Note 2 - Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Policy Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation
The condensed consolidated financial statements include the accounts of our wholly owned and majority owned subsidiaries. Intercompany transactions and balances have been eliminated. Management evaluates its investments on an individual basis for purposes of determining whether or not consolidation is appropriate. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Earnings (loss) Per Share | Basic and Diluted Earnings (Loss) Per Share
Earnings per share is calculated in accordance with the ASC 260-10, Earnings Per Share. Basic earnings-per-share is based upon the weighted average number of common shares outstanding. Diluted earnings-per-share is based on the assumption that all dilutive convertible notes, stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management Estimates | Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates reflected in the consolidated financial statements include, but are not limited to, amortization and depletion allowances, the recoverability of the carrying amount and estimated useful lives of long-lived assets, asset retirement obligations, the valuation of equity instruments issued in connection with financing transactions and share-based compensation, and assumptions used in valuing derivative liabilities. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Full Cost Method of Accounting For Oil and Gas Properties | Full Cost Method of Accounting for Oil and Gas Properties
The Company has elected to utilize the full cost method of accounting for its oil and gas activities. In accordance with the full cost method of accounting, the Company capitalizes all costs associated with acquisition, exploration and development of oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool on a country by country basis. Capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves once proved reserves are determined to exist.
Capitalized oil and gas property costs within a cost center are amortized on an equivalent unit-of-production method. The equivalent unit-of-production rate is computed on a quarterly basis by dividing production by proved oil and gas reserves at the beginning of the quarter then applying such amount to capitalized oil and gas property costs, which includes estimated asset retirement costs, less accumulated amortization, plus the estimated future expenditures (based on current costs) to be incurred in developing proved reserves, net of estimated salvage values. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Full Cost Ceiling Test | Full Cost Ceiling Test
Oil and gas properties without estimated proved reserves are not amortized until proved reserves associated with the properties can be determined or until impairment occurs. At the end of each reporting period, the unamortized costs of oil and gas properties are subject to a "ceiling test" which limits capitalized costs to the sum of the estimated future net revenues from proved reserves, discounted at 10% per annum to present value, based on current economic and operating conditions, adjusted for related income tax effects. If the net capitalized costs exceed the cost center ceiling, the excess is recognized as an impairment of oil and gas properties. An impairment recognized in one period may not be reversed in a subsequent period even if higher oil and gas prices increase the cost center ceiling applicable to the subsequent period.
The estimated future net revenues used in the ceiling test are calculated using average quoted market prices for sales of oil and gas on the first calendar day of each month during the preceding 12-month period prior to the end of the current reporting period. Prices are held constant indefinitely and are not changed except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts. Prices used in the ceiling test computation do not include the impact of derivative instruments because the Company elected not to meet the criteria to qualify its derivative instruments for hedge accounting treatment.
The Company assesses oil and gas properties at least quarterly to ascertain whether impairment has occurred. In assessing impairment, the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data. Through September 30, 2016, the Company has not experienced any impairment of its capitalized oil and gas properties.
The Company recorded depletion expense of $10,709 and $29,970 for the nine months ended September 30, 2016 and 2015, respectively.
Proceeds from the sale of oil and gas properties are recognized as a reduction of capitalized oil and gas property costs with no gain or loss recognized, unless the sale significantly alters the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. Through September 30, 2016, the Company has not had any sales of oil and gas properties that significantly alter that relationship. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation | Asset Retirement Obligation
The Company accounts for its future asset retirement obligations ("ARO") by recording the fair value of the liability during the period in which it was incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The increase in carrying value of a property associated with the capitalization of an ARO is included in proven oil and gas properties in the balance sheets. The ARO consists of costs related to the plugging of wells, removal of facilities and equipment, and site restoration on its oil and gas properties. The asset retirement liability is accreted to operating expense over the useful life of the related asset. As of September 30, 2016 and December 31, 2015, the Company had an ARO of $99,451 and $92,512, respectively. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil and Gas Revenue | Oil and Gas Revenue
Revenues are recognized when hydrocarbons have been delivered, the customer has taken title and collection is reasonably assured. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation, Option and Incentive Plans Policy | Share-Based Compensation
The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of share-based payment awards to employees and directors on the date of grant using an option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in the Company's Statements of Operations. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance where the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement, Policy | Fair Value Measurements
The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents and current liabilities, including notes payable and convertible notes, each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The Company uses Level 2 inputs for its valuation methodology for the warrant derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company's derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentrations | Concentrations
The Company maintains cash balances at a bank in California. The account is insured by the Federal Deposit Insurance Corporation up to $250,000 per institution. At September 30, 2016 and December 31, 2015, the Company did not have amounts on deposit that exceeded the FDIC-insured limits.
The future results of the Company's oil and natural gas operations will be affected by the market prices of oil and natural gas. The availability of a ready market for oil and natural gas products in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of oil, natural gas and liquid products, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty.
One customer accounts for 100% of oil sales for the nine months ended September 30, 2016 and 2015. The Company's oil and gas properties are located in Illinois. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company uses a probability weighted average Black-Scholes-Merton model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company's financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company's financial statements and disclosures.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share Based Payment Accounting, to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its consolidated financial statements.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2014-15 on the Company's financial statements and disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
|
Note 2 - Summary of Significant Accounting Policies: Basic and Diluted Earnings (loss) Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
|
Note 3 - LowCal Convertible and Promissory Notes Payable: Summary of Convertible Promissory Notes (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Summary of Convertible Promissory Notes | LowCal convertible and promissory notes payable at September 30, 2016 and December 31, 2015 are as follows:
|
Note 4 - Notes Payable: Schedule of Notes Payable (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Notes Payable | Notes payable at September 30, 2016 and December 31, 2015 are as follows:
|
Note 6 - Derivative Liabilities: Schedule of Warrant Valuation Assumptions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warrant Valuation Assumptions | As of July 2, 2016 and December 31, 2015, the derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following assumptions:
|
Note 9 - Stock Options and Warrants: Schedule of Stock Options, Activity (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Options, Activity | A summary of the option activity is presented below:
|
Note 9 - Stock Options and Warrants: Schedule of Options Exercisable and Outstanding (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Options Exercisable and Outstanding | The following table summarizes information about options outstanding at September 30, 2016:
The following table summarizes information about options exercisable at September 30, 2016:
|
Note 9 - Stock Options and Warrants: Schedule of Warrants, Activity (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warrants, Activity | A summary of warrant activity is presented below:
|
Note 9 - Stock Options and Warrants: Schedule of Exerciseable and Outstanding Warrants (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Exerciseable and Outstanding Warrants | The following tables summarize information about warrants outstanding and exercisable at September 30, 2016:
|
Note 1 - Organization (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Mar. 31, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Total stockholders' deficit | $ (21,352,283) | $ (21,352,283) | $ (28,087,526) | |||
Net loss | (3,291,151) | $ (7,600,580) | (15,343,664) | $ (29,073,388) | (35,453,024) | |
Net cash used in operating activities | (742,866) | (949,921) | (1,420,003) | |||
Acquisition termination fee | 5,500,000 | |||||
Structuring fee | $ 4,000,000 | $ 4,000,000 | ||||
Convertible Debt, Current | $ 8,250,000 | 8,250,000 | $ 8,250,000 | |||
Dune Energy, Inc | ||||||
Acquisition termination fee | $ 5,500,000 | |||||
Plethora Bay Oil & Gas Ltd | ||||||
Noncontrolling Interest, Ownership Percentage by Parent | 90.00% | 90.00% | ||||
LowCal Loan | ||||||
Debt Instrument, Maturity Date | May 01, 2016 | |||||
EOS Atlantic Oil and Gas | Plethora Bay Oil & Gas Ltd | ||||||
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 10.00% | 10.00% | ||||
Works Property | ||||||
Future Estimated Capital Requirements | $ 2,500,000 | $ 2,500,000 |
Note 2 - Summary of Significant Accounting Policies: Basic and Diluted Earnings (loss) Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 17,180,734 | 20,027,992 |
Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 5,750,000 | 1,325,000 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 9,430,734 | 16,702,992 |
Convertible notes | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 2,000,000 | 2,000,000 |
Note 2 - Summary of Significant Accounting Policies: Full Cost Ceiling Test (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Depletion | $ 10,709 | $ 29,970 |
Oil and Gas Properties | ||
Percent of discount for estimating proven oil and gas reserves | 10.00% |
Note 2 - Summary of Significant Accounting Policies: Asset Retirement Obligation (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Text Block [Abstract] | ||
Asset Retirement Obligation, Current | $ 99,451 | $ 92,512 |
Note 2 - Summary of Significant Accounting Policies: Concentrations (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Sales | Customer Concentration Risk | ||
Concentration Risk, Percentage | 100.00% | 100.00% |
Note 3 - LowCal Convertible and Promissory Notes Payable: Summary of Convertible Promissory Notes (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Convertible Debt, Current | $ 8,250,000 | $ 8,250,000 |
LowCal Convertible Note | ||
Convertible Debt, Current | 5,000,000 | 5,000,000 |
LowCal Promissory Note | ||
Convertible Debt, Current | $ 3,250,000 | $ 3,250,000 |
Note 3 - LowCal Convertible and Promissory Notes Payable (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2013 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Dec. 31, 2015 |
Aug. 31, 2014 |
Feb. 08, 2013 |
|
Debt Instrument, Face Amount | $ 1,208,160 | |||||||||
Proceeds from issuance of notes payable | $ 956,810 | $ 150,000 | ||||||||
Loan extension terms | the parties agreed that if: (1) the Company pays off the $3,250,000 principal balance of the Second LowCal Note in full, plus any accrued and unpaid interest, and (2) either: (A) the Company closes a transaction where it acquires at least $10,000,000 in additional assets, through an asset purchase, stock purchase, merger, or other similar transaction, which shall be determined by generally accepted accounting principles, or (B) the Company successfully uplists its common stock to a national exchange market (NASDAQ or the New York Stock Exchange), then the following will automatically occur: (1) the conversion price of the LowCal Loan will be reduced from $2.50 per share to $2.00 per share, and (2) any outstanding principal and interest due on the LowCal Loan will be converted at a price of $2.00 per share into restricted shares of the Company's common stock, which shall be issued to LowCal. | |||||||||
Issuance of common stock in connection with amendment of note agreement, Shares | 75,000 | |||||||||
Issuance of common stock in connection with amendment of note agreement, Value | $ 300,000 | |||||||||
Value of warrants issued with note payable | $ 186,290 | |||||||||
Warrants | ||||||||||
Warrants, Outstanding | 1,775,000 | |||||||||
LowCal Loan | ||||||||||
Proceeds from Convertible Debt | $ 4,980,000 | $ 1,500,000 | $ 3,500,000 | |||||||
Debt Instrument, Face Amount | $ 500,000 | |||||||||
Debt Instrument, Interest Rate, Stated Percentage | 10.00% | |||||||||
Forgiveness of Accrued Interest | $ 667,000 | |||||||||
Debt Instrument, Maturity Date | May 01, 2016 | |||||||||
Investment Warrants Expiration Date | May 01, 2020 | |||||||||
Issuance of stock for extension of notes payable, Shares | 75,000 | |||||||||
Issuance of common stock in connection with amendment of note agreement, Shares | 75,000 | |||||||||
Issuance of common stock in connection with amendment of note agreement, Value | $ 300,000 | |||||||||
Value of warrants issued with note payable | $ 188,378 | |||||||||
Warrants, Outstanding | 1,000,000 | |||||||||
LowCal Loan | Warrants | ||||||||||
Fair Value Measurements, Valuation Techniques | Black-Scholes option- pricing model | |||||||||
Expected Volatility | 174.00% | |||||||||
Expected dividend yield | 0.00% | |||||||||
Risk-free interest rate | 1.16% | |||||||||
LowCal Loan 2 | ||||||||||
Proceeds from issuance of notes payable | $ 750,000 | |||||||||
Debt Instrument, Payment Terms | The Second LowCal Note must also be repaid upon the earlier to occur of: (i) the Company closing certain potential acquisition transactions, or (ii) the Company closing a financing for a minimum of $20,000,000. | |||||||||
Minimum | LowCal Loan | Warrants | ||||||||||
Expected Life (years) | 2 years 9 months 22 days | |||||||||
Maximum | LowCal Loan | Warrants | ||||||||||
Expected Life (years) | 4 years 1 month 21 days |
Note 4 - Notes Payable: Schedule of Notes Payable (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Notes payable, net of discount of $204,613 and $0 | $ 1,770,538 | $ 1,383,000 |
Total notes payable | 1,983,000 | 1,383,000 |
Note Payable, discount | (212,462) | 0 |
Note Payable 1 | ||
Notes payable, net of discount of $204,613 and $0 | 300,000 | 600,000 |
Note Payable 2 | ||
Notes payable, net of discount of $204,613 and $0 | 653,000 | 453,000 |
Note Payable 3 | ||
Notes payable, net of discount of $204,613 and $0 | 100,000 | 100,000 |
Note Payable 4 | ||
Notes payable, net of discount of $204,613 and $0 | 0 | 150,000 |
Note Payable 5 | ||
Notes payable, net of discount of $204,613 and $0 | 130,000 | 30,000 |
Note Payable 6 | ||
Notes payable, net of discount of $204,613 and $0 | 0 | 50,000 |
Note Payable 7 | ||
Notes payable, net of discount of $204,613 and $0 | 100,000 | 0 |
Note Payable 8 | ||
Notes payable, net of discount of $204,613 and $0 | 200,000 | 0 |
Note Payable 9 | ||
Notes payable, net of discount of $204,613 and $0 | $ 500,000 | $ 0 |
Note 6 - Derivative Liabilities (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Jul. 02, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Aug. 31, 2014 |
|
Change in fair value of derivative liabilities | $ (113,840) | $ (1,695,203) | $ 4,991,925 | $ 4,241,697 | ||
Exercise price of warrants | $ 1.00 | |||||
Fair value of warrants reclassified to additional paid-in capital | $ 1,389,628 | $ 188,378 | ||||
Warrants | ||||||
Warrants, Outstanding | 1,775,000 |
Note 6 - Derivative Liabilities: Schedule of Warrant Valuation Assumptions (Details) - Derivative Liabilities - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jul. 02, 2016 |
Dec. 31, 2015 |
|
Fair Value Measurements, Valuation Techniques | Black-Scholes-Merton pricing model | |
Exercise Price | $ 1.00 | $ 2.00 |
Stock Price | $ 1.00 | $ 4.00 |
Risk-free interest rate | 0.59% | 1.06% |
Expected Life (years) | 2 years 1 month 20 days | 2 years 7 months 20 days |
Expected Volatility | 169.00% | 180.00% |
Expected dividend yield | 0.00% | 0.00% |
Expected forfeitures | 0.00% | 0.00% |
Fair Value | $ 1,389,628 | $ 6,381,553 |
Note 7 - Related Party Transactions (Details) - Plethora Enterprises, LLC - USD ($) |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Compensation expense | $ 270,000 | $ 270,000 | |
Due to Related Parties, Current | $ 317,752 | $ 180,000 |
Note 9 - Stock Options and Warrants: Schedule of Options Exercisable and Outstanding (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Intrinsic value of outstanding and exercisable stock options | $ 0 | $ 2,186,250 |
Outstanding, Number of Shares | 5,750,000 | 1,325,000 |
Outstanding, Weighted Average Remaining Life (Years) | 3 years 10 months 17 days | 3 years 29 days |
Outstanding, Weighted Average Exercise Price | $ 1.33 | $ 2.50 |
1.00 | ||
Outstanding, Number of Shares | 4,500,000 | |
Outstanding, Weighted Average Remaining Life (Years) | 4 years 3 months 11 days | |
Outstanding, Weighted Average Exercise Price | $ 1.00 | |
2.50 | ||
Outstanding, Number of Shares | 1,250,000 | |
Outstanding, Weighted Average Remaining Life (Years) | 2 years 5 months 1 day | |
Outstanding, Weighted Average Exercise Price | $ 2.50 |
Note 10 - Commitments and Contingencies (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Mar. 31, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 17, 2014 |
|
Acquisition termination fee | $ 5,500,000 | |||||
Structuring fee | $ 4,000,000 | $ 4,000,000 | ||||
Dune Energy, Inc | ||||||
Cash Tender Offer, Per Share Price | $ 0.30 | |||||
Acquisition termination fee | $ 5,500,000 |
Note 11- Subsequent Events (Details) - USD ($) |
1 Months Ended | 3 Months Ended |
---|---|---|
Nov. 14, 2016 |
Sep. 30, 2016 |
|
Text Block [Abstract] | ||
Additional deposit for potential acquisition | $ 50,000 | $ 50,000 |
)^;=YE=7X*8?=
MA7]+9FP9FA^6?ZPH]__X+#LO<6W[JZ"?S([!^F!C*N?::C/L&]63"ZM?SJV^
M ;CR/$QA@C5$L.X(UE.")/*OV&&./F;FDIL%D8U'@$$1
M'[."1;8+(EN/8 V*^)@-++);$-EY!%M0Q,?L8)%D023Q"!)0Q,?,!#Y=$$FG
M!"D<>!\S$WA;W;,J]G!" 8?^ 303^QBLU$''*\,4COX#:";\,5BN@P[V*. $
M> #-9$ ,UO6@XQ5V"N? V@F">*E\H^GM6UZ$JSC@^;R8.D%B#<>Q4P>^*#'
M/ @GCS>G\NIZE$*%N-6N)4YVQS[XC-WC_PW/LX9 TA0;3FVJ7S"G(
MO57=V=@=6_(1JK;R!<_2#MWP+T1O5
MVVN)D5IB8V*^U)).M<0:4Q$SDK'83I0@1(E!%)M$$^;9P&2%#;,U,+EC#:1(
M(:D^?4!MVNY275L[18909,:W)O8$.9(@]YB57*L1:)80XA"C0(@*CUDQ,:F=
M9-C[G"S#2RU%9EWQ,P@5G5KWF#N+NGR&:81=$*RTL/&+JL$Z+2\4C"3[3"M7<1W3G[MLHJT3
MZ$2@/P@D-8HV'YEC96'TB$S:VIZ%$\SWU&]$A6PLFC2]-VI]]5S2[*X@YR T
M86C$')>8?$80KSZWH&LM)CI=MEBG;];HF^1P<^5PMRZP71/8)H'ME<#OZQ$3
MYGB%R;,?3G^\D#F5UK^!U!+ P04 " !)BVY))Z:Z.:,! "Q P &0
M 'AL+W=OBL19BC
MU>G4(OQHUOZX,$>9[='JE C2,9H,TF12VQ6CK71'^S2)IG:;A& 46:3($D4J
M-Z6%)5/J%#&:'-+D4DUCD^FGY("F9$17CDR]D\P/R*,!^61 SF;'XQ,]2BKC
M5$[L0RK&C"2@D01BF3(WY=&PO=V]R:W-H965TA+@^1!$_
M7.C0\AV[TE&^.;%I:(5\G,X1OTZT/6JCH8]P'&?1T'9C6%=Z[7FJ*W83?3?2
MYRG@MV%HIS]/M&?W?8C"9>%'=[X(M1#55;3:';N!CKQC8S#1TSY\1 \-*I5$
M*WYV],ZM^T %_\+8JWKX=MR'L8J!]O0@E(M67MYH0_M>>9+DW[/3#Z8RM.\7
M[U]TNC+\EY;3AO6_NJ.XR&CC,#C24WOKQ0]V_TKG'%+E\,!ZKG^#PXT+-BPF
M83"T[^;:C?IZ-V^*>#:##?!L@%<#G'D-R&Q 5@.D#2(3F<[K:_<])/3AUHOR_9OT_E*OFOC6 U[_ZT1WE1
M:N,P.+)3<^OD"[__8',-J4YXX)V8_@:'FY"\7T+"H&\^S+,=IN?=?*'Q' 8'
MX#D KP$D]P:0.8!\"8B,LJFN;XULJG+D]V TS;@VNN?H@:B3.P1BVAS-<:G*
MA-I]KY*