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12. SHAREHOLDERS’ EQUITY
 6 Months Ended
Jun. 30, 2013
Equity [Abstract]  
13. SHAREHOLDERS’ EQUITY

NOTE 13 – SHAREHOLDERS’ EQUITY

 

PREFERRED STOCK

 

On April 23, 2013, the Company’s board of directors approved a 1 for 3 reverse stock split of its common and preferred stock, effective as of the close of business on April 23, 2013. All preferred stock had previously been converted to common stock on a one for one basis on January 27, 2013 prior to the reverse stock split. As a result of the reverse stock split, every three shares of the Company’s issued common stock were converted into one share of the Company’s new common stock. Fractional shares resulting from the reverse stock split were rounded up to the nearest whole share. The stock split affected all issued and outstanding shares of the Company's common and preferred stock (of which there was no preferred stock issued at the date of the split), as well as common or preferred stock underlying stock options, stock appreciation rights, restricted stock units, warrants and convertible debentures outstanding immediately prior to its effectiveness on April 23, 2013. All share and per share amounts have been retroactively adjusted to reflect the reverse stock split.

 

Preferred Stock Issuances

 

During the six month period ended June 30, 2013, activity in the Company’s preferred stock was as follows:

 

● In January 2013, the Company issued 47,059 shares of its Series A preferred stock in connection with a cashless warrant exercise.

 

● In January 2013, 6,281,904 shares of the Company’s Series A preferred stock were converted by investors into 6,281,904 shares of the Company’s common stock pursuant to the automatic conversion provisions of the Company’s Series A Convertible Preferred Stock Amended and Restated Certificate of Designations.

 

● During 2012, the Company had issued 555,556 shares of Series A preferred stock valued at $2.25 per share in connection with the Excellong purchase agreement. The Company had a contingent obligation to repurchase up to the full 555,556 shares of Series A preferred stock at a price per share of $2.25 in the event that, on March 29, 2013, the market value of the stock was less than $1,250,000, and the sellers demand repurchase. Accordingly, the shares were redeemable at the option of the holder as of December 31, 2012 and were classified outside of shareholders’ equity as of that date. On January 27, 2013, the shares redeemable at the option of the holders were converted to redeemable common stock. On March 29, 2013, the market value of the redeemable common stock exceeded $1,250,000, so the sellers were not able to demand redemption and the shares were reclassified to equity as of March 31, 2013.

 

At June 30, 2013, there were -0- shares of the Company’s Series A preferred stock outstanding.

 

COMMON STOCK

 

At June 30, 2013, the Company was authorized to issue 200,000,000 shares of its common stock with a par value of $0.001 per share.

 

In October 2011, the Company granted 233,334 shares of its restricted Common Stock valued at $0.30 per share to an executive of the Company. These shares were valued at $70,000. The shares are subject to forfeiture in the event the recipient is no longer an officer to the Company, which risk of forfeiture lapses with respect to 50% of the shares on June 1, 2012, 25% on December 31, 2012 and the final 25% on June 1, 2013, all contingent upon the recipient's continued service with the Company. These awards were authorized and issued under the PEDCO 2012 Equity Incentive Plan adopted in February 2012. At June 30, 2013, 25% of these 233,334 shares were subject to forfeiture.

 

In February 2012, the Company granted to five of its consultants and employees a total of 551,668 shares of its restricted common stock valued at $0.30 per share. The Company recorded stock-based compensation expense of $165,500 on the date of grant. The shares are subject to forfeiture in the event the recipient is no longer an employee, officer, director or consultant to the Company, which risk of forfeiture lapses with respect to 50% of the shares six months from the date of grant, 20% twelve months from the date of grant, 20% eighteen months from the date of grant, and the final 10% twenty-four months from the date of grant, all contingent upon the recipient’s continued service with the Company. These awards were authorized and issued under the PEDCO 2012 Equity Incentive Plan adopted in February 2012. At June 30, 2013, 30% of these 551,668 shares were subject to forfeiture.

 

 

On April 23, 2013, the Company completed a 1-for-3 reverse stock split of its common stock, effective as of the close of business on April 23, 2013. As a result of the reverse stock split, every three shares of the Company’s common stock were converted into one share of the Company’s common stock. Fractional shares resulting from the reverse stock split were rounded up to the nearest whole share. The common stock split was effective with the Financial Industry Regulatory Authority ("FINRA") and in the marketplace on May 9, 2013. All preferred stock had previously been converted to common stock on a one for one basis on January 27, 2013 prior to the reverse stock split. The stock split affected all issued and outstanding shares of the Company's common stock, Series A preferred stock, as well as common stock underlying stock options, stock appreciation rights, restricted stock units, warrants and convertible debentures outstanding immediately prior to the effectiveness of the stock split. As of April 23, 2013, the Company's issued and outstanding shares of common stock decreased from approximately 41.7 million pre-stock split shares to approximately 13.9 million post-stock split shares.

 

During the six months ended June 30, 2013, the Company issued shares of common stock as follows:

 

● In January 2013, the Company issued 13,334 shares of common stock with a grant date fair value of $80,000 to an independent contractor for services provided to the Company. The 13,334 shares issued were for services performed in December of 2012 and recorded as a stock payable in 2012.

 

● On January 27, 2013, the Company issued 6,281,904 shares of common stock on a 1-for-1 conversion of all the Company’s 6,281,904 outstanding Series A preferred stock, pursuant to the automatic conversion provisions of the Company’s Series A Convertible Preferred Stock Amended and Restated Certificate of Designations.

 

● During 2012, the Company had issued 555,556 shares of Series A preferred stock valued at $2.25 per share in connection with the Excellong purchase agreement. The Company had a contingent obligation to repurchase up to the full 555,556 shares of Series A preferred stock at a price per share of $2.25 in the event that, on March 29, 2013 (the date that is twelve months from the closing date), the market value of the stock was less than $1,250,000, and the sellers demand repurchase. Accordingly, the shares were redeemable at the option of the holder as of December 31, 2012 and were classified outside of shareholders’ equity as of that date. On January 27, 2013, the shares redeemable at the option of the holders were converted to redeemable common stock. On March 29, 2013, the market value of the redeemable common stock exceeded $1,250,000, so the sellers were not able to demand redemption and the shares were reclassified to equity as of March 31, 2013.

 

● On March 29, 2013, the Company rescinded the prior cashless exercise of certain options to purchase an aggregate of 127,800 shares of common stock of the Company by four Company employees, effective December 19, 2012. As a result of the rescission, an aggregate of 120,710 shares of common stock of the Company which were originally issued upon the cashless exercise of the options were surrendered by the holders and cancelled in exchange for the original options at the original terms.
   
● On July 1, 2013, the Company’s Board of Directors approved the issuance, effective June 23, 2013 (the “Effective Date”), of an aggregate of 27,804 shares of Common Stock of the Company (the “Esenjay Shares”) to Esenjay Oil & Gas, Ltd., Winn Exploration Co., Inc., Lacy Properties, Ltd., and Crain Energy, Ltd. (collectively, “Esenjay”), as additional consideration due to Esenjay upon the spudding by Condor Energy Technology, LLC (“Condor”) of the State 16-7-60 1H well (the “State Well”) on June 13, 2013.  As of June 30, 2013, the Company recorded $116,499 as a stock subscription receivable for the total of 27,804 shares at $4.19 per share on the date of grant to reflect the shares owed Esenjay by the Company on Condor’s behalf and a corresponding liability for common stock payable.