Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 31, 2014 | Jun. 28, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'PEDEVCO CORP | ' | ' |
Entity Central Index Key | '0001141197 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 26,539,013 | ' |
Entity Public Float | ' | ' | $44,437,679 |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | |
Current assets: | ' | ' | |
Cash | $6,613,470 | $2,478,250 | [1] |
Accounts receivable - oil and gas | 110,547 | 16,571 | [1] |
Accounts receivable - oil and gas - related party | 47,076 | 112,488 | [1] |
Accounts receivable - related party | 78,830 | 83,064 | [1] |
Deferred financing costs | 50,000 | ' | [1] |
Prepaid expenses and other current assets | 74,310 | 133,900 | [1] |
Total current assets | 6,974,233 | 2,824,273 | [1] |
Oil and gas properties: | ' | ' | |
Oil and gas properties, subject to amortization, net | 2,173,245 | 2,420,688 | [1] |
Oil and gas properties, not subject to amortization, net | 6,629,394 | 925,382 | [1] |
Total oil and gas properties, net | 8,802,639 | 3,346,070 | [1] |
Equipment, net of accumulated depreciation | ' | 87,883 | [1] |
Notes receivable - related parties | ' | 2,786,064 | [1] |
Deposit for business acquisition | 10,019,633 | ' | [1] |
Investments - equity method | ' | 2,098,334 | [1] |
Investments - cost method | 4,100 | 4,100 | [1] |
Total assets | 25,800,605 | 11,146,724 | [1] |
Current liabilities: | ' | ' | |
Accounts payable | 173,475 | 132,243 | [1] |
Accounts payable - related party | 2,346,818 | 922,112 | [1] |
Accrued expenses | 1,501,221 | 1,449,014 | [1] |
Accrued expenses - related party | 1,057,261 | 36,168 | [1] |
Notes payable, net of discounts of $93,957 and $0, respectively | 2,633,430 | ' | [1] |
Notes payable - related party, net of discounts of $316,570 and $0, respectively | 7,126,109 | 2,170,065 | [1] |
Total current liabilities | 14,838,318 | 4,709,602 | [1] |
Long-term liabilities: | ' | ' | |
Asset retirement obligations | 75,447 | 59,298 | [1] |
Total liabilities | 14,913,765 | 4,768,900 | [1] |
Commitments and contingencies | ' | ' | [1] |
Redeemable Series A convertible preferred stock: -0- and 555,556 shares issued and outstanding at December 31, 2013 and 2012, respectively | ' | 1,250,000 | [1] |
Shareholders' equity: | ' | ' | |
Series A convertible preferred stock, $0.001 par value, 100,000,000 shares authorized, -0- and 6,234,845 shares issued and outstanding at December 31, 2013 and 2012, respectively | ' | 6,235 | [1] |
Common stock, $0.001 par value, 200,000,000 shares authorized; 26,121,062 and 7,183,501 shares issued and outstanding at December 31, 2013 and 2012, respectively | 26,121 | 7,184 | [1] |
Stock subscription receivable | -10,000,000 | -276,326 | [1] |
Additional paid-in capital | 51,782,870 | 18,167,419 | [1] |
Accumulated deficit | -30,922,151 | -12,776,688 | [1] |
Total shareholders' equity | 10,886,840 | 5,127,824 | [1] |
Total liabilities and shareholders' equity | $25,800,606 | $11,146,724 | [1] |
[1] | Restated |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current liabilities: | ' | ' |
Discount on notes payable | $93,957 | $0 |
Discount on notes payable, related party | $316,570 | $0 |
Stockholders' equity: | ' | ' |
Redeemable Series A convertible preferred stock, Issued | 0 | 555,556 |
Redeemable Series A convertible preferred stock, Outstanding | 0 | 555,556 |
Series A convertible preferred stock, par value | $0.00 | $0.00 |
Series A convertible preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Series A convertible preferred stock, shares issued | 0 | 6,234,845 |
Series A convertible preferred stock, shares outstanding | 0 | 6,234,845 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 26,121,062 | 7,183,501 |
Common stock, shares outstanding | 26,121,062 | 7,183,501 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenue: | ' | ' |
Oil and gas sales | $743,656 | $503,153 |
Operating expenses: | ' | ' |
Lease operating costs | 648,462 | 281,103 |
Selling, general and administrative expense | 7,149,103 | 3,729,525 |
Impairment of goodwill | ' | 6,820,003 |
Impairment of oil and gas properties | 3,302,803 | 180,262 |
Loss on oil and gas property acquisition deposit | 200,000 | ' |
Depreciation, depletion, amortization and accretion | 437,040 | 131,332 |
Loss on settlement of payables | 8,455 | 139,874 |
Total operating expenses | 11,745,863 | 11,282,099 |
Gain on sale of equity method investments | ' | 64,168 |
Loss from equity method investments | -5,778,021 | -357,612 |
Operating Loss | -16,780,228 | -11,072,390 |
Other income (expense): | ' | ' |
Interest expense | -1,591,405 | -986,248 |
Interest income | 196,871 | 36,359 |
Gain on debt extinguishment | ' | 9,268 |
Gain on change in derivative fair value | 14,005 | ' |
Other income | 15,294 | ' |
Total other expense | -1,365,235 | -940,621 |
Net loss | ($18,145,463) | ($12,013,011) |
Net loss per common share: | ' | ' |
Basic and diluted | ($1.07) | ($1.94) |
Weighted average number of common shares outstanding: | ' | ' |
Basic and diluted | 16,996,470 | 6,205,024 |
CONSOLIDATED_STATEMENTS_OF_SHA
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (USD $) | Series A Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Stock Subscriptions Receivable | Accumulated Deficit | Total | |
Beginning Balance, Amount at Dec. 31, 2011 | $2,222 | $5,167 | $1,644,841 | ' | ($763,677) | $888,553 | |
Beginning Balance, Shares at Dec. 31, 2011 | 2,222,224 | 5,167,423 | ' | ' | ' | ' | |
Stock compensation | ' | ' | 305,920 | ' | ' | 305,920 | |
Issuance of Series A preferred stock net of placement costs, Amount | 3,684 | ' | 8,011,387 | ' | ' | 8,015,071 | |
Issuance of Series A preferred stock net of placement costs, Shares | 3,684,448 | ' | ' | ' | ' | ' | |
Issuance of Series A preferred stock to related party for services, Amount | 77 | ' | 172,423 | ' | ' | 172,500 | |
Issuance of Series A preferred stock to related party for services, Shares | 76,667 | ' | ' | ' | ' | ' | |
Issuance of common stock in connection with Blast merger, Amount | ' | 475 | 4,491,750 | ' | ' | 4,492,225 | |
Issuance of common stock in connection with Blast merger, Shares | ' | 474,291 | ' | ' | ' | ' | |
Issuance of Series A preferred stock for oil and gas properties, Amount | 123 | ' | 276,203 | -276,326 | ' | ' | |
Issuance of Series A preferred stock for oil and gas properties, Shares | 122,812 | ' | ' | ' | ' | ' | |
Issuance of Series A preferred stock for settlement of payables, Amount | 93 | ' | 559,405 | ' | ' | 559,498 | |
Issuance of Series A preferred stock for settlement of payables, Shares | 93,250 | ' | ' | ' | ' | ' | |
Issuance of Series A preferred stock for debt extension, Amount | 45 | ' | 279,956 | ' | ' | 280,001 | |
Issuance of Series A preferred stock for debt extension, Shares | 44,445 | ' | ' | ' | ' | ' | |
Issuance of restricted common stock for compensation, Amount | ' | 785 | 234,715 | ' | ' | 235,500 | |
Issuance of restricted common stock for compensation, Shares | ' | 785,000 | ' | ' | ' | ' | |
Issuance of common stock for debt conversion, Amount | ' | 529 | 1,516,234 | ' | ' | 1,516,763 | |
Issuance of common stock for debt conversion, Shares | ' | 529,172 | ' | ' | ' | ' | |
Exercise of common stock options, Amount | ' | 20 | 4,780 | ' | ' | 4,800 | |
Exercise of common stock options, Shares | ' | 20,000 | ' | ' | ' | ' | |
Cashless exercise of options - common stock, Amount | ' | 161 | -161 | ' | ' | ' | |
Cashless exercise of options - common stock, Shares | ' | 161,086 | ' | ' | ' | ' | |
Cashless exercise of warrants- common stock, Amount | ' | 38 | -38 | ' | ' | ' | |
Cashless exercise of warrants- common stock, Shares | ' | 37,529 | ' | ' | ' | ' | |
Warrants issued to MIE for sale of equity interests in White Hawk | ' | ' | 2,586 | ' | ' | 2,586 | |
Conversion of preferred stock to common stock, Amount | -9 | 9 | ' | ' | ' | ' | |
Conversion of preferred stock to common stock, Shares | -9,000 | 9,000 | ' | ' | ' | ' | |
Beneficial conversion feature | ' | ' | 667,418 | ' | ' | 667,418 | |
Net loss | ' | ' | ' | ' | -12,013,011 | -12,013,011 | |
Ending Balance, Amount at Dec. 31, 2012 | 6,235 | 7,184 | 18,167,419 | -276,326 | -12,776,688 | 5,127,824 | [1] |
Ending Balance, Shares at Dec. 31, 2012 | 6,234,846 | 7,183,501 | ' | ' | ' | ' | |
Issuance of common stock for cash, Amount | ' | 3,250 | 6,278,517 | ' | ' | 6,281,767 | |
Issuance of common stock for cash, Shares | ' | 3,250,000 | ' | ' | ' | ' | |
Issuance of common stock for services, Amount | ' | 13 | 79,987 | ' | ' | 80,000 | |
Issuance of common stock for services, Shares | ' | 13,334 | ' | ' | ' | ' | |
Cashless exercise of warrants - preferred stock, Amount | 47 | ' | -47 | ' | ' | ' | |
Cashless exercise of warrants - preferred stock, Shares | 47,059 | ' | ' | ' | ' | ' | |
Conversion of redeemable preferred stock to preferred stock - Esenjay, Amount | 556 | ' | 1,249,444 | ' | ' | 1,250,000 | |
Conversion of redeemable preferred stock to preferred stock - Esenjay, Shares | 555,556 | ' | ' | ' | ' | ' | |
Stock compensation | ' | ' | 3,198,240 | ' | ' | 3,198,240 | |
Conversion of preferred stock to common stock, Amount | -6,838 | 6,838 | ' | ' | ' | ' | |
Conversion of preferred stock to common stock, Shares | -6,837,461 | 6,837,461 | ' | ' | ' | ' | |
Fractional share issuance for reverse common stock split | ' | 289 | ' | ' | ' | ' | |
Forfeiture of MIE's capital account in White Hawk | ' | ' | 124,301 | ' | ' | 124,301 | |
Allocation of excess losses of equity investment to paid-in capital | ' | ' | 217,927 | ' | ' | 217,927 | |
S.E. Stock subscription received from Condor | ' | ' | ' | 392,825 | ' | 392,825 | |
Issuance of common stock in private placement for cash, Amount | ' | 7,333 | 21,992,667 | -10,000,000 | ' | 12,000,000 | |
Issuance of common stock in private placement for cash, Shares | ' | 7,333,334 | ' | ' | ' | ' | |
Issuance of common stock to STXRA for payables settlement, Amount | ' | 34 | 109,865 | ' | ' | 109,899 | |
Issuance of common stock to STXRA for payables settlement, Shares | ' | 33,815 | ' | ' | ' | ' | |
Issuance of common stock for oil and gas properties, Amount | ' | 28 | 116,499 | ' | ' | 116,499 | |
Issuance of common stock for oil and gas properties, Shares | ' | 27,804 | ' | ' | ' | ' | |
Issuance of common stock for compensation, Amount | ' | 1,522 | -1,522 | ' | ' | ' | |
Issuance of common stock for compensation, Shares | ' | 1,522,418 | ' | ' | ' | ' | |
Warrants issued with bridge notes | ' | ' | 274,947 | ' | ' | 274,947 | |
Warrants issued for extension of bridge notes | ' | ' | 181,475 | ' | ' | 181,475 | |
Rescission of exercise of common stock options, Amount | ' | -121 | 121 | ' | ' | ' | |
Rescission of exercise of common stock options, Shares | ' | -120,710 | ' | ' | ' | ' | |
Cashless exercise of options, Amount | ' | 35 | -35 | ' | ' | ' | |
Cashless exercise of options, Shares | ' | 34,916 | ' | ' | ' | ' | |
Exercise of warrants for cash, Amount | ' | 5 | 11,020 | ' | ' | 11,025 | |
Exercise of warrants for cash, Shares | ' | 4,900 | ' | ' | ' | ' | |
Net loss | ' | ' | ' | ' | -18,145,463 | -18,145,463 | |
Ending Balance, Amount at Dec. 31, 2013 | ' | $26,121 | $51,782,870 | ($10,000,000) | ($30,922,151) | $10,886,840 | |
Ending Balance, Shares at Dec. 31, 2013 | ' | 26,121,062 | ' | ' | ' | ' | |
[1] | Restated |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash Flows From Operating Activities: | ' | ' |
Net loss | ($18,145,463) | ($12,013,011) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Stock-based compensation expense | 3,198,240 | 621,420 |
Impairment of goodwill | ' | 6,820,003 |
Impairment of oil and gas properties | 2,945,903 | 180,262 |
Impairment of expired leases | 356,900 | ' |
Loss on oil and gas property acquisition deposit | 200,000 | ' |
Depreciation, depletion, amortization and accretion | 437,040 | 131,692 |
Loss on settlement of payables | 8,455 | 139,874 |
Gain on sale of equity method investments | ' | -64,168 |
Loss from equity method investments | 5,778,021 | 357,612 |
Amortization of debt discount | 665,306 | 507,505 |
Amortization of deferred financing and costs | 72,095 | ' |
Series A preferred stock issued for debt extension | ' | 280,001 |
Gain on debt extinguishment | ' | -9,268 |
Gain on change in fair value of derivative | -14,005 | ' |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable - oil and gas | 15,233 | 90,192 |
Accounts receivable - oil and gas - related party | 65,412 | ' |
Accounts receivable - related party | 5,978 | ' |
Prepaid expenses and other current assets | 59,590 | -94,532 |
Accounts payable | 19,801 | 289,041 |
Accounts payable - related party | 1,857,138 | ' |
Accrued expenses | -652,120 | -40,966 |
Accrued expenses - related party | 863,592 | ' |
Cash used in operating activities | -2,262,884 | -2,804,343 |
Cash Flows From Investing Activities: | ' | ' |
Cash paid for oil and gas properties | -5,340,610 | -1,500,000 |
Cash paid for drilling costs | -1,050,286 | ' |
Cash paid for equipment | ' | -1,358 |
Cash paid for acquisition of Blast Energy Services, Inc. | ' | -454,614 |
Proceeds from sale of equity method investment | ' | 1,000,000 |
Cash paid for deposits on oil and gas properties | -200,000 | ' |
Cash paid for deposit on Asia Sixth acquisition | -10,019,633 | ' |
Proceeds from acquistion of White Hawk | 91,114 | ' |
Proceeds from notes receivable | 342,181 | ' |
Issuance of notes receivable - related parties | -4,020,279 | -2,786,064 |
Cash used in investing activities | -20,197,513 | -3,742,036 |
Cash Flows From Financing Activities: | ' | ' |
Repayment of notes payable to related party | ' | -200,000 |
Proceeds from stock subscription receivable | 392,825 | ' |
Proceeds from notes payable, net of financing costs | 2,950,000 | ' |
Proceeds from issuance of notes payable to related party | 5,050,000 | 1,028,287 |
Cash paid for deferred financing cost | -90,000 | ' |
Proceeds from issuance of common stock, net of offering costs | 18,281,767 | ' |
Proceeds from sales of Series A preferred stock | ' | 8,015,071 |
Proceeds from exercise of options for common stock | ' | 4,800 |
Proceeds from exercise of warrants for common stock | 11,025 | ' |
Net cash provided by financing activities | 26,595,617 | 8,848,158 |
Net increase in cash | 4,135,220 | 2,301,779 |
Cash at beginning of the year | 2,478,250 | 176,471 |
Cash at end of the year | 6,613,470 | 2,478,250 |
Cash paid for: | ' | ' |
Interest | ' | ' |
Income taxes | ' | ' |
Noncash investing and financing activities: | ' | ' |
Accrual of oil and gas properties acquisition costs | 405,777 | ' |
Accrual of drilling costs | ' | 1,733,859 |
Accrual of unproved property acquisition costs | 405,777 | ' |
Transfer of unproved properties to proved properties | ' | 697,016 |
Asset retirement costs capitalized | 1,446 | 16,552 |
Change in estimates of asset retirement obligations | 1,690 | 1,250,030 |
Issuance of 555,556 shares of Series A preferred stock in exchange for acquisition of Excellong E&P-2, Inc. | ' | 3,734,986 |
Contribution of Excellong E&P-2, Inc. to White Hawk as equity investment | ' | ' |
Cash paid on behalf of PEDEVCO to Excellong E&P-2, Inc. by MIE to acquire interest in White Hawk | ' | 1,000,000 |
Cash paid on behalf of PEDEVCO to Condor by MIE for drilling operations | ' | 1,141,778 |
Accrual of purchase adjustment for sale of White Hawk interest | ' | 58,332 |
Warrants issued to MIE for sale of White Hawk equity interests | ' | 2,586 |
Issuance of 76,667 shares of Series A preferred stock to settle payables | ' | 172,500 |
Conversion of Series A preferred stock to common stock | 6,282 | ' |
Conversion of redeemable preferred stock to common stock | 556 | ' |
Expiration of redemption feature in 555,556 shares of Series A preferred stock issued in acquisition of Excellong E&P-2, Inc. | 1,250,000 | ' |
Issuance of Series A convertible preferred stock in settlement of carried interest payable | ' | 419,624 |
Issuance of Series A convertible preferred stock to third party on behalf of Condor for oil and gas properties acquired | ' | 276,326 |
Issuance of preferred stock for cashless exercise of warrants | 47 | ' |
Issuance of common stock to settle payables | 181,444 | ' |
Conversion of Series A preferred stock to common stock | ' | 27 |
Issuance of common stock for convertible notes payable | ' | 1,029,545 |
Beneficial conversion feature associated with convertible debt | ' | 667,418 |
Cashless exercise of common stock options and warrants | 35 | 595 |
Issuance of common stock to Esenjay in exchange for acquisition of Excellong E&P-2, Inc. on behalf of Condor | 116,499 | ' |
Issuance of common stock to employees | 305 | ' |
Rescission of common stock issued for exercise of stock options in 2012 | 121 | ' |
Debt discount related to warrants issued in conjunction with notes payable | 327,357 | ' |
Debt discount related to warrants issued for extension of bridge notes | 110,975 | ' |
Deferred financing costs related to warrants issued in conjunction with notes payable | 18,090 | ' |
Fair value of derivative warrant instruments issued with notes payable | 14,005 | ' |
Reduction in the Company's investment account for equity in investment losses | 5,193,577 | ' |
Consolidation of net assets and liabilities of equity investment in White Hawk: | 1,638,191 | ' |
Forfeiture of White Hawk member's capital account upon withdrawal | 124,301 | ' |
Reduction in note receivable from Condor for MSL deposit owed to Condor | 432,433 | ' |
Paid in kind liability recorded as debt discount | 480,000 | ' |
Paid in kind liability recorded as debt discount - related party | $157,500 | ' |
1_BASIS_OF_PRESENTATION
1. BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
BASIS OF PRESENTATION | ' |
The accompanying consolidated financial statements of PEDEVCO CORP., formerly Blast Energy Services, Inc. (“PEDEVCO” or the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). |
2_DESCRIPTION_OF_BUSINESS
2. DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
DESCRIPTION OF BUSINESS | ' |
PEDEVCO’s primary business plan is: (i) engaging in the acquisition, exploration, development and production of oil and natural gas resources in the United States, primarily shale oil and natural gas and secondarily conventional oil and natural gas opportunities in the United States (U.S.), and (ii) utilizing the Company’s strategic relationships for acquisition, exploration, development and production in Asia, with a particular focus on China and Kazakhstan. | |
The Company’s principal operating properties are located in the Niobrara formation in the Denver-Julesburg Basin (the “DJ Basin”) in Morgan and Weld Counties, Colorado. | |
The Company owns a 20% interest in Condor Energy Technology, LLC (“Condor”). Condor’s operations consist primarily of working interests in oil and gas leases in the Niobrara shale formation located in the DJ Basin in Morgan and Weld Counties, Colorado. The remaining interest in Condor is owned by an affiliate of MIE Holdings Corporation (Hong Kong Stock Exchange code: 1555.HK), one of the largest independent upstream onshore oil companies in China (“MIE Holdings”). In addition, the Company has made a direct investment into the drilling of the first three wells that Condor has drilled. | |
As of December 31, 2013, the Company also owned an average 98% working interest in leases covering the Mississippian Lime located in Comanche, Harper, Barber and Kiowa Counties, Kansas. The Company serves as the operator of this asset and anticipates drilling its first well in the first half of 2014. | |
As of January 1, 2013, the Company owned a 50% interest in White Hawk Petroleum, LLC (“White Hawk”). White Hawk’s operations consist primarily of working interests in oil and gas leases in the Eagle Ford shale formation in McMullen County, Texas. The remaining interest in White Hawk was owned by an affiliate of MIE Holdings, MIE Jurassic Energy Corporation (“MIEJ”). On December 20, 2013, White Hawk entered into a series of transactions pursuant to which White Hawk divested approximately 50% of its assets and used the funds from the divestiture to acquire MIEJ’s interest in White Hawk. MIEJ then withdrew from White Hawk as a member on December 31, 2013, with the Company’s effective interests in the Eagle Ford shale assets remaining unchanged and unaffected by the transactions. As a result of the transactions, the Company became the 100% owner of White Hawk. See Note 5. Accordingly, as of December 31, 2013, the Company has accounted for White Hawk as a consolidated subsidiary of the Company and will no longer account for the entity as an equity investment. In addition, on February 19, 2014, White Hawk sold its remaining interests in the Eagle Ford Shale play for net proceeds of $2,718,158. See Note 19. | |
The Company plans to focus initially on developing shale oil and gas assets held by the Company in the U.S., including its first oil and gas working interests known as the “Niobrara Asset,” its oil and gas working interests known as the “Mississippian Asset,” and its recently acquired oil and gas working interests known as the “Wattenberg Asset,” which it acquired in March 2014 from Continental Resources, Inc. (“Continental). In addition, the Company has also entered into an agreement to acquire an approximate 51% ownership in Asia Sixth Energy Resources Limited (“Asia Sixth”), a British Virgin Islands entity, which holds an approximate 60% ownership interest in Aral Petroleum Capital Limited Partnership (“Aral”), a Kazakhstan entity. Aral holds a production license covering a 380,000 acre oil and gas producing asset located in the Pre-Caspian Basin in Kazakhstan, which the Company plans to close upon receipt of required approvals from the government of Kazakhstan, anticipated to be received no later than the third quarter of 2014. See Note 19. The Company plans to seek additional shale oil and gas and conventional oil and gas asset acquisition opportunities in the U.S. and Asia utilizing its strategic relationships and technologies that may provide the Company a competitive advantage in accessing and exploring such assets. Some or all of these assets may be acquired by subsidiaries, and equity investees such as Condor and White Hawk, or others that may be formed at a future date. | |
To further develop the business plan, in the first quarter of 2014, the Company entered into a financing transaction with investors to acquire the Wattenberg Asset and provide funding for the Company’s 2014 drilling plan. In connection with the transaction, the Company sold a portion of its interests to the parties to the transaction in its Mississippian Asset, its Wattenberg Asset and its interest in Asia Sixth. See Note 19. | |
3_SUMMARY_OF_SIGNIFICANT_ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | |
Dec. 31, 2013 | ||
Accounting Policies [Abstract] | ' | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |
Basis of Presentation and Principles of Consolidation. The consolidated financial statements herein have been prepared in accordance with GAAP and include the accounts of the Company and those of its wholly-owned subsidiaries as follows: (i) Eagle Domestic Drilling Operations LLC, a Texas limited liability company (which was voluntarily dissolved effective July 10, 2013); (ii) Blast AFJ, Inc., a Delaware corporation; (iii) Pacific Energy Development Corp., a Nevada corporation; (iv) Pacific Energy Technology Services, LLC, a Nevada limited liability company; (v) Pacific Energy & Rare Earth Limited, a Hong Kong company; (vi) Blackhawk Energy Limited, a British Virgin Islands company; (vii) Pacific Energy Development MSL, LLC, a Nevada limited liability company, and (viii) as of December 31, 2013, White Hawk Petroleum, LLC, a Nevada limited liability company. All significant intercompany accounts and transactions have been eliminated. We also own 100% of Red Hawk Petroleum, LLC, a Nevada limited liability company, which was formed on January 16, 2014. As of March 7, 2014, we only held 50% of Pacific Energy Development MSL, LLC. All significant intercompany accounts and transactions have been eliminated. | ||
Equity Method Accounting for Joint Ventures. The majority of the Company’s oil and gas interests are held all or in part by the following joint ventures which are collectively owned with affiliates of MIE Holdings: | ||
- Condor Energy Technology LLC, a Nevada limited liability company owned 20% by the Company and 80% by an affiliate of MIE Holdings. The Company accounts for its 20% ownership in Condor using the equity method; and | ||
- White Hawk Petroleum, LLC, a Nevada limited liability company owned 50% by the Company and 50% by an affiliate of MIE Holdings through December 30, 2013. Through December 30, 2013, the Company accounted for its 50% interest in White Hawk using the equity method. As a result of a series of transactions pursuant to which MIEJ divested its 50% interest in White Hawk as of December 31, 2013, described in greater detail in Note 5, White Hawk became a consolidated subsidiary effective on December 31, 2013. | ||
The Company evaluated its relationship with Condor and White Hawk to determine if either qualified as a variable interest entity ("VIE"), as defined in ASC 810-10, and whether the Company is the primary beneficiary, in which case consolidation would be required. The Company determined that both Condor and White Hawk qualified as VIE’s, but since the Company is not the primary beneficiary of either Condor or White Hawk, the Company concluded that consolidation was not required during 2013 for either entity (though White Hawk was consolidated as of December 31, 2013 following MIEJ’s withdrawal). | ||
Use of Estimates in Financial Statement Preparation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates. Significant estimates generally include those with respect to the amount of recoverable oil and gas reserves, the fair value of financial instruments, oil and gas depletion, asset retirement obligations, and stock-based compensation. | ||
Cash and Cash Equivalents. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of December 31, 2013 and 2012, cash equivalents consisted of money market funds and cash on deposit. | ||
Concentrations of Credit Risk. Financial instruments which potentially subject the Company to concentrations of credit risk include cash deposits placed with financial institutions. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2013, approximately $6,272,356 of the Company’s cash balances were uninsured. The Company has not experienced any losses on such accounts. | ||
Sales to three customers comprised 53%, 23% and 19% of the Company’s total oil and gas revenues for the year ended December 31, 2013. Sales to two customers comprised 71% and 29% of the Company’s total oil and gas revenues for the year ended December 31, 2012. The Company believes that, in the event that its primary customers are unable or unwilling to continue to purchase the Company’s production, there are a substantial number of alternative buyers for its production at comparable prices. | ||
Accounts Receivable. Accounts receivable typically consist of oil and gas receivables. The Company has classified these as short-term assets in the balance sheet because the Company expects repayment or recovery within the next 12 months. The Company evaluates these accounts receivable for collectability considering the results of operations of these related entities and when necessary records allowances for expected unrecoverable amounts. To date, no allowances have been recorded. | ||
Revenue Recognition. All revenue is recognized when persuasive evidence of an arrangement exists, the service or sale is complete, the price is fixed or determinable and collectability is reasonably assured. Revenue is derived from the sale of crude oil and natural gas. Revenue from crude oil and natural gas sales is recognized when the product is delivered to the purchaser and collectability is reasonably assured. The Company follows the “sales method” of accounting for oil and natural gas revenue, so it recognizes revenue on all natural gas or crude oil sold to purchasers, regardless of whether the sales are proportionate to its ownership in the property. A receivable or liability is recognized only to the extent that the Company has an imbalance on a specific property greater than its share of the expected remaining proved reserves. If collection is uncertain, revenue is recognized when cash is collected. | ||
Equipment. Equipment is stated at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to expense as incurred. Renewals and betterments which extend the life or improve existing equipment are capitalized. Upon disposition or retirement of equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 3 to 10 years. | ||
Deferred Property Acquisition Costs. The Company defers the costs, such as title and legal fees, related to oil and gas property acquisitions. At the time the acquisition is completed, these costs are reclassified and included as part of the purchase price of the property acquired. To the extent a property acquisition is not consummated these costs are expensed. | ||
Oil and Gas Properties, Successful Efforts Method. The successful efforts method of accounting is used for oil and gas exploration and production activities. Under this method, all costs for development wells, support equipment and facilities, and proved mineral interests in oil and gas properties are capitalized. Geological and geophysical costs are expensed when incurred. Costs of exploratory wells are capitalized as exploration and evaluation assets pending determination of whether the wells find proved oil and gas reserves. Proved oil and gas reserves are the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, (i.e., prices and costs as of the date the estimate is made). Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions. | ||
Exploratory wells in areas not requiring major capital expenditures are evaluated for economic viability within one year of completion of drilling. The related well costs are expensed as dry holes if it is determined that such economic viability is not attained. Otherwise, the related well costs are reclassified to oil and gas properties and subject to impairment review. For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is under way or firmly planned. Otherwise the related well costs are expensed as dry holes. | ||
Exploration and evaluation expenditures incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above. | ||
Depreciation, depletion and amortization of capitalized oil and gas properties is calculated on a field by field basis using the unit of production method. Lease acquisition costs are amortized over the total estimated proved developed and undeveloped reserves and all other capitalized costs are amortized over proved developed reserves. | ||
Impairment of Long-Lived Assets. The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of the asset by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposition. If the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and estimated fair value. | ||
Asset Retirement Obligations. If a reasonable estimate of the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells can be made, the Company will record a liability (an asset retirement obligation or “ARO”) on its consolidated balance sheet and capitalize the present value of the asset retirement cost in oil and gas properties in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation assuming the normal operation of the asset, using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for the Company. After recording these amounts, the ARO will be accreted to its future estimated value using the same assumed cost of funds and the capitalized costs are depreciated on a unit-of-production basis over the estimated proved developed reserves. Both the accretion and the depreciation will be included in depreciation, depletion and amortization expense on our consolidated statements of operations. | ||
Income Taxes. The Company utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry-forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized. | ||
Stock-Based Compensation. We utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. | ||
The Company estimates volatility by considering the historical stock volatility. The Company has opted to use the simplified method for estimating expected term, which is generally equal to the midpoint between the vesting period and the contractual term. | ||
Earnings or Loss per Common Share. Basic earnings per common share equal net earnings or loss divided by weighted average common shares outstanding during the period. Diluted earnings per share include the impact on dilution from all contingently issuable shares, including options, warrants and convertible securities. The common stock equivalents from contingent shares are determined by the treasury stock method. The Company incurred net losses for the years ended December 31, 2013 and 2012, and therefore, basic and diluted earnings per share for those periods are the same as all potential common equivalent shares would be anti-dilutive. The Company excluded 1,404,724 and 1,218,206 potentially issuable shares of common stock related to options and 3,053,370 and 633,631 potentially issuable shares of common stock related to warrants due to their anti-dilutive effect for the years ended December 31, 2013 and 2012, respectively. | ||
Derivative Liability. The Company follows Financial Accounting Standards Board (“FASB”), Derivatives and Hedging (“ASC 815-40”), which limits the extent to which the conversion or exercise price (the “strike price”) of an instrument can be adjusted for subsequent transactions. The Company utilizes a two-step process to determine whether an instrument is indexed to its stock: (a) evaluate the instrument’s contingent exercise provisions, if any and (b) evaluate the instrument’s settlement provisions. If it is determined the instrument is not indexed to the Company’s stock, the instrument is recognized as a derivative instrument at issuance and is measured at fair value at each reporting period and the change is recorded in earnings. | ||
Fair Value of Financial Instruments. The Company follows FASB ASC 820, Fair Value Measurement (“ASC 820”), which clarifies fair value as an exit price, establishes a hierarchal disclosure framework for measuring fair value, and requires extended disclosures about fair value measurements. The provisions of ASC 820 apply to all financial assets and liabilities measured at fair value. | ||
As defined in ASC 820, fair value, clarified as an exit price, represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. | ||
As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value. | ||
Level 1 – Quoted prices in active markets for identical assets or liabilities. | ||
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | ||
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | ||
Recently Issued Accounting Pronouncements. There were various accounting standards and interpretations issued during 2013 and 2011, none of which are expected to have a material impact on the Company’s financial position, operations or cash flows. | ||
In July 2012 the FASB issued ASU 2012-02 Testing Indefinite-Lived Intangible Assets for Impairment, which amends Topic 350 and gives companies the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Topic 350-30. This ASU shall be applied prospectively for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and early adoption is permitted. Implementation of the ASU is not expected to have a significant impact on the Company’s consolidated financial statements. | ||
Subsequent Events. The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration. |
4_MERGER_AGREEMENT_PACIFIC_ENE
4. MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Merger Agreement - Pacific Energy Development Corp | ' | ||||
MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP | ' | ||||
On July 27, 2012, the Company completed the transactions contemplated by the January 13, 2012, Agreement and Plan of Reorganization (as amended, the “Merger Agreement”), between the Company, Blast Acquisition Corp., a wholly-owned Nevada subsidiary of the Company (“MergerCo”), and Pacific Energy Development Corp., a privately-held Nevada corporation (“PEDCO” or “Pacific Energy Development Corp.”). | |||||
Pursuant to the Merger Agreement on July 27, 2012, MergerCo was merged with and into PEDCO, with PEDCO continuing as the surviving entity and becoming a wholly-owned subsidiary of the Company, in a transaction structured to qualify as a tax-free reorganization (the “Merger”). In connection with the Merger, the Company issued former security holders of PEDCO 5,972,421 shares of common stock, 6,538,892 shares of new Series A Preferred Stock, warrants to purchase an aggregate of 373,334 shares of our common stock, warrants to purchase 230,862 shares of our new Series A Preferred Stock, and options to purchase 1,411,667 shares of the Company’s common stock. As the merger was accounted for as a reverse acquisition, these shares have been reflected as the historical equity of the Company as the accounting acquirer in the recapitalization. | |||||
Additionally, immediately prior to the Merger becoming effective, the shareholders of the Company approved an Amended and Restated Certificate of Formation and an Amended and Restated Series A Convertible Preferred Stock Designation which upon effectiveness: (i) converted all 2,000,000 outstanding shares of the Company’s Series A Convertible Preferred Stock and the single outstanding share of Series B Preferred Stock into 2,000,001 shares of common stock of the Company on a one to one basis, and immediately thereafter, (ii) effected a one for one hundred and twelve (1:112) reverse stock split rounding up for all fractional shares of the Company’s then outstanding common stock, resulting in the conversion of approximately 159,238,556 shares of preferred and common stock into 474,291 shares of common stock (the “Reverse Split” and the “Amended and Restated Certificate of Formation”). All share and per share amounts in the consolidated financial statements and footnotes have been retroactively restated for the impact of the reverse split and the 1-for-3 reverse stock split of our common and preferred stock that was effected on April 23, 2013. | |||||
Furthermore, in connection with the Reverse Split and the Amended and Restated Certificate of Formation, the Company changed its name to “PEDEVCO Corp.”, and amended its Certificate of Formation, to effect various changes to its Certificate of Formation, including, but not limited to increasing the Company’s authorized capitalization to 300,000,000 shares of capital stock post-Reverse Split, which includes 200,000,000 shares of common stock, $0.001 par value per share (“Common Stock”); and 100,000,000 authorized shares of Preferred Stock, including 25,000,000 authorized shares of Series A Convertible Preferred Stock, $0.001 par value per share ("New Series A Preferred Stock"), which shares were designated in connection with approval of and filing of the Amended and Restated Certificate of Designations of the Company’s Series A Convertible Preferred Stock, which amended and replaced the prior designation of the Company’s Series A Convertible Preferred Stock (which shares were automatically converted into shares of common stock pursuant to the Amended and Restated Certificate of Formation). | |||||
The acquisition was accounted for as a “reverse acquisition,” and Pacific Energy Development Corp. was deemed to be the accounting acquirer in the acquisition. The Company’s assets and liabilities are recorded at their fair value. Pacific Energy Development Corp.'s assets and liabilities are carried forward at their historical costs. The financial statements of Pacific Energy Development Corp. are presented as the continuing accounting entity since it is the acquirer for the purpose of applying purchase accounting. The equity section of the balance sheet and earnings per share of Pacific Energy Development Corp. are retroactively restated to reflect the effect of the exchange ratio established in the Merger Agreement. Goodwill is recorded for the excess of fair value of consideration transferred and fair value of net assets. As a result of the issuance of the shares of common stock pursuant to the Merger Agreement, a change in control of the Company occurred. | |||||
The purchase price on the date of acquisition was: | |||||
Value of stock issued in acquisition | $ | 4,492,225 | |||
Cash advanced from PEDCO prior to merger | 507,757 | ||||
Merger expenses | 36,841 | ||||
Total Purchase Price | $ | 5,036,823 | |||
Current assets | 978 | ||||
Fixed assets | 112,089 | ||||
Oil and gas properties | 127,088 | ||||
Current liabilities | (646,787 | ) | |||
Asset retirement obligations assumed | (41,712 | ) | |||
Long-term liabilities | (1,334,836 | ) | |||
(1,783,180 | ) | ||||
Goodwill | $ | 6,820,003 | |||
Management evaluated the amount of goodwill associated with the transaction following the allocation of fair value to the assets and liabilities acquired and determined that the goodwill should be fully impaired and has reflected the impairment on the statement of operations as of the date of the merger. | |||||
Centurion Debt Modifications | |||||
In connection with the anticipated Merger, on January 13, 2012, Blast entered into an amendment to note purchase agreement (the “Note Purchase Amendment”), with Centurion Credit Funding LLC (“Centurion”), a secured creditor of Blast, and on May 29, 2012, Blast entered into the Second Amendment to First Tranche Promissory Note and the Second Amendment to the Second Tranche Promissory Note (collectively, the “Second Amendments to the Promissory Notes”) with Centurion. The Note Purchase Amendment and the Second Amendments to the Promissory Notes amended the Note Purchase Agreement, dated February 24, 2011 (the “Note Purchase Agreement”), entered into with Centurion primarily in order (i) to grant consent to the Merger, (ii) to waive, solely with respect to the Company post-Merger, certain loan covenants and restrictions as they relate to the assets of PEDCO and the operations of the Company post-Merger, (iii) to waive Centurion’s right of first refusal to provide additional funding to Blast, and (iv) to provide for the conversion of up to 50% of the loan amounts outstanding to Centurion in the original principal amount of $2,522,111, of which approximately $1,306,078 was owed as of the date of the parties’ entry into the Note Purchase Amendment, into shares of the Company’s common stock at $2.25 per share at the option of Centurion at any time after June 9, 2012, provided that the Company in its sole discretion may waive the 50% conversion limitation. The conversion rights described above are subject to Centurion being prohibited from converting any portion of the outstanding notes which would cause it to beneficially own more than 4.99% of the Company’s then outstanding shares of common stock, subject to Centurion’s right to increase such limit to up to 9.99% of the Company’s outstanding shares with 61 days prior written notice to the Company. | |||||
The Promissory Notes issued in connection with the Note Purchase Amendment were amended to provide an extension of the maturity date of such Promissory Notes, which were due February 2, 2012 under the terms of the original notes, to the earlier of (i) thirty (30) days after the termination of the Merger Agreement, if the Merger Agreement s terminated before June 1, 2012, (ii) August 1, 2012, or (iii) the date all obligations and indebtedness under such Promissory Notes are accelerated in accordance with the terms and conditions of such Promissory Notes. Furthermore, commencing February 2, 2012, the interest amount on the Promissory Notes was increased from 10% to 18% per annum, and the new interest rate included both the principal amount and the Exit Fee payable described below. Lastly, the Exit Fee, which is 12% of the repayment amount, was increased by an aggregate of $15,000 for the Promissory Notes and was expensed by Blast at the date of modification. | |||||
On August 30, 2012, following the Merger, the Company entered into the Third Amendment to Senior Secured Promissory Notes (First and Second Tranche) with Centurion (the “Third Amendment to the Promissory Notes”), which amended certain provisions of the Senior Secured Promissory Note (First Tranche) and Senior Secured Promissory Note (Second Tranche), each originally dated February 24, 2011 and amended on January 13, 2012 and May 29, 2012 (together, as amended, the “Promissory Notes”). The Promissory Notes were amended to provide an extension of the maturity date which were due as of August 1, 2012, to the earlier of (i) November 30, 2012, or (ii) the date all obligations and indebtedness under such Promissory Notes are accelerated in accordance with the terms and conditions of such Promissory Notes. The Company further agreed to deposit an additional $700,000 as a “repayment deposit” into the Company’s bank account that was subject to a deposit account control agreement (the “DACA”) between the Company and Centurion in order to provide additional security to Centurion with the DACA being revised to provide that Centurion may not have access to such funds until the maturity date of such Promissory Notes, unless a default or event of default has occurred. Additionally, the Third Amendment to the Promissory Notes removed the prior prohibition which limited Centurion to converting the Promissory Notes only once every thirty days. | |||||
The Company applied ASC 470-50-40/55 “Debtor’s Accounting for a Modification or Exchange of Debt Instrument” and concluded that the Note Purchase Amendment dated January 13, 2012 constituted a debt extinguishment rather than a debt modification because a significant conversion feature was added to the terms of the note. The conversion feature was contingent on the completion of the Merger. As such, the Company’s Merger with Blast triggered the contingent conversion feature. As a result, the Company recorded a loss on debt extinguishment of $159,913 during the year ended December 31, 2012, as summarized below. | |||||
Loss on Extinguishment: | |||||
Estimated fair value of debt after modification | $ | 1,494,749 | |||
Less: Carrying value of pre-modification debt | (1,334,836 | ) | |||
Loss on debt extinguishment | $ | 159,913 | |||
In connection with the Note Purchase Amendment, the convertible debenture was also analyzed for a beneficial conversion feature after the debt modification at which time it was concluded that a beneficial conversion feature existed. Accordingly, a debt discount was recorded at the date of the modification. See detail summary below for carrying value of debt on the date of the merger. | |||||
Post-Modification Debt: | |||||
Estimated fair value of debt after modification | $ | 1,494,749 | |||
Less: beneficial conversion feature recorded as debt discount | (667,418 | ) | |||
Carrying value at date of Merger | $ | 827,331 | |||
On August 31, 2012, Centurion converted $101,250 of principal and accrued interest, into 45,000 shares of the Company’s common stock. In October 2012, Centurion converted $536,250 of principal into 238,334 shares of the Company’s common stock. In November 2012, Centurion converted $392,045 of principal into 174,242 shares of the Company’s common stock. Centurion forgave the principal and interest balance of $169,181 and the balance owed Centurion at December 31, 2012 was paid in full. See detail summary below of loan activity and balance as of December 31, 2012. | |||||
Carrying value at merger | $ | 827,331 | |||
Accrued interest | 75,699 | ||||
Accretion of beneficial conversion feature recorded as debt discount | 667,418 | ||||
Less: amortization of debt premium | (159,913 | ) | |||
Less: Principal and accrued interest of convertible note converted to common stock | (1,029,545 | ) | |||
Less: Cash payments on principal | (211,809 | ) | |||
Balance of note forgiven by Centurion | (169,181 | ) | |||
Balance at December 31, 2012 | $ | -0- | |||
The Company recorded a gain on debt extinguishment in the amount of $169,181 which was netted against loss on extinguishment in the amount of $159,913 resulting in a net gain of $9,268. | |||||
Prior to the Merger, as additional security for the repayment of the First Note and Second Note, and pursuant to a Stock Purchase Agreement, the Company sold Centurion one (1) share of its newly designated Series B Preferred Stock, in consideration for $100, which entitled Centurion to consent to and approve the Company’s or any of its subsidiaries’ entry into any bankruptcy proceeding, consent to the appointment of a receiver, liquidator or trustee or the assignment by the Company or any of its subsidiaries for the benefit of any creditors. The Company assigned no value to this Series B Preferred Share. The one share of the Company’s Series B Preferred Stock was converted on a one-for-one basis into one (1) share of the Company’s pre-Reverse Split common stock in connection with the Merger. | |||||
Other Debt Conversions | |||||
In connection with the Merger, the Company approved the conversion of certain other outstanding debt obligations of the Company at $6.72 per share. At the time of the Mergers these debt obligations included: $335,500 of accrued compensation due to the members of Board of Directors, $6,150 of short term loans from members of the Board of Directors, $225,958 of accrued salaries and vacation pay owed to the Company’s employees for a total amount of $567,608. These amounts were converted at $6.72 per share under debt conversion agreements (“Debt Conversion Agreements”) into approximately 84,465 shares of the Company’s common stock in August and September 2012. Additionally, in May 2012, pursuant to a settlement agreed upon among the Company, Trident Partners Ltd. (“Trident”), and certain principals for Trident, the placement fee owed by the Company to Trident was reduced from $119,990 to $47,960 and Trident agreed to convert the remaining amount due at $6.72 per share into approximately 7,143 shares of the Company’s common stock upon completion of the Merger. |
5_OIL_AND_GAS_PROPERTIES
5. OIL AND GAS PROPERTIES | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Extractive Industries [Abstract] | ' | ||||||||||||||||||||
OIL AND GAS PROPERTIES | ' | ||||||||||||||||||||
The following tables summarize the Company’s oil and gas activities by classification for the years ended December 31, 2013 and 2012: | |||||||||||||||||||||
January 1, | Additions | Disposals | Transfers | December 31, | |||||||||||||||||
2013 | 2013 | ||||||||||||||||||||
Oil and gas properties subject to amortization | $ | 2,479,535 | $ | 3,834,509 | $ | - | $ | - | $ | 6,314,044 | |||||||||||
Oil and gas properties not subject to amortization | 1,105,645 | 6,060,912 | - | - | 7,166,557 | ||||||||||||||||
Asset retirement costs | 16,552 | 11,529 | - | - | 28,081 | ||||||||||||||||
Accumulated depreciation, depletion and impairment | (255,662 | ) | (4,450,381 | ) | - | - | (4,706,043 | ) | |||||||||||||
Total oil and gas properties, net | $ | 3,346,070 | $ | 5,456,569 | $ | - | $ | - | $ | 8,802,639 | |||||||||||
January 1, | Additions | Disposals | Transfers | December 31, | |||||||||||||||||
2012 | 2012 | ||||||||||||||||||||
Oil and gas properties subject to amortization | $ | - | $ | 5,532,519 | $ | (3,750,000 | ) | $ | 697,016 | $ | 2,479,535 | ||||||||||
Oil and gas properties not subject to amortization | 1,724,234 | 78,427 | - | (697,016 | ) | 1,105,645 | |||||||||||||||
Asset retirement costs | - | 16,552 | - | - | 16,552 | ||||||||||||||||
Accumulated depreciation, depletion and impairment | - | (270,676 | ) | 15,014 | - | (255,662 | ) | ||||||||||||||
Total oil and gas properties, net | $ | 1,724,234 | $ | 5,356,822 | $ | (3,734,986 | ) | $ | - | $ | 3,346,070 | ||||||||||
The depletion recorded for production on properties subject to amortization for the years ended December 31, 2013 and 2012 amounted to $346,020 and $90,414, respectively. The Company recorded impairment of leases for the years ended December 31, 2013 and 2012 of $356,902 and $180,262, respectively, for lease acreage that expired during the year due to non-renewals or non-utilization of leases. The Company recorded impairment of properties subject to amortization for the years ended December 31, 2013 and 2012 of $2,945,903 and $0, respectively. The consolidation of White Hawk also added $801,556 of accumulated depletion and impairment for the year ended December 31, 2013. | |||||||||||||||||||||
During the year ended December 31, 2013, additions to oil and gas properties subject to amortization consisted of drilling and completion costs of $589,455 and $460,832 for the Logan 2H and Waves 1H wells and the addition of $2,784,222 related to the consolidation of White Hawk. During the year ended December 31, 2013, additions to oil and gas properties not subject to amortization consisted of the acquisition of the Mississippian asset of $5,287,367 described below, the addition of $734,370 related to the consolidation of White Hawk and $39,175 related to legal and title work performed on leases in our Niobrara assets. | |||||||||||||||||||||
During the year ended December 31, 2012, the Company began drilling operations on its Ford Family Trust 2H (“FFT2H”), Logan 2H and Waves 1H wells. The Company completed the FFT2H well in July 2012 and incurred $1,143,100 in drilling and completion costs. As of December 31, 2012, the Company has incurred $246,365 and $263,382 in drilling costs related to the Logan 2H and Waves 1H wells, respectively, which were completed subsequent to December 31, 2012. As a result of this drilling the Company reclassified $697,016 of the carrying value of the properties from properties not subject to amortization to properties subject to amortization. The Company acquired the Eagle Ford property for $3,750,000 in additions, and subsequently contributed the property to White Hawk (as a disposal for $3,750,000), for the year ended December 31, 2012. | |||||||||||||||||||||
Mississippian Asset | |||||||||||||||||||||
On February 22, 2013, Pacific Energy Development MSL, LLC (“PEDCO MSL”), a wholly-owned subsidiary of the Company, entered into an Agreement for Purchase of Term Assignment (the “Purchase Agreement”) with Berexco LLC (“Berexco”) for the acquisition of unproved oil and gas interests in the Mississippian Lime formation covering approximately 6,763 net acres located in Comanche, Harper, Barber and Kiowa Counties, Kansas (the “Mississippian Asset”) and approximately 10.5 square miles of related 3-D seismic data, for an aggregate purchase price of $4,207,117. Pursuant to the Purchase Agreement, Berexco applied $864,866 as the initial escrow deposit due from PEDCO MSL to Berexco in connection with a previously contemplated transaction between Condor and Berexco. The Company was obligated to Condor to refund the amount of $432,433 for the portion of the initial deposit previously paid by MIE Jurassic Holding Corporation (“MIEJ”) in connection with the previously contemplated transaction between Condor and Berexco. The $432,433 was subsequently paid in March 2014. The remaining $3,774,684 was paid in cash by the Company to Berexco in March 2013. The Company also capitalized $245,695 for legal fees and title work, $72,726 for additional costs (including $67,341 for acquiring an additional 122 acres) and $507,221 payable to South Texas Reservoir Alliance LLC (“STXRA”) for acquisition costs for total initial capitalized costs of approximately $5,032,760. The Company has subsequently capitalized an additional $254,607 of legal and other costs for the Mississippian property for a total cost of $5,287,367. | |||||||||||||||||||||
On March 25, 2013, PEDCO MSL completed the acquisition of the Mississippian asset, acquiring an average 98% working interest in the Mississippian Lime properties. PEDCO MSL serves as the operator of the asset. | |||||||||||||||||||||
The Mississippian acquisition is structured as a primary term assignment by the seller to PEDCO MSL of the leasehold interests which expire on December 29, 2014. If PEDCO MSL drills at least three (3) horizontal wells on these leasehold interests during this primary term, then PEDCO MSL has the option, in its sole discretion, to extend the primary term with respect to some or all of the leases subject to the assignment for an additional one (1) year period upon payment to the seller of an additional $200 per net acre covered by the leases upon which the option is exercised. If PEDCO MSL completes a commercially producing well during the primary or extended terms, then the seller shall assign such leases to PEDCO MSL for as long as the wells produce in paying quantities, with each horizontal well of at least 4,000 feet in length holding 320 acres covered by the leases, each short horizontal well with a length of between less than 4,000 feet and at least 2,000 feet in length holding 160 acres, and each vertical well holding 10 acres. The seller shall retain an overriding royalty interest equal to the positive difference, if any, obtained by subtracting existing leasehold burdens from 22.5% before payout and 25% after payout (reduced to the extent the seller assigns less than a 100% working interest to PEDCO MSL). For purposes of the Mississippian agreement, “payout” is defined as such time, on a well by well basis, when a well has sold the following specified barrels of oil equivalent (“BOE”), (utilizing a conversion factor for gas sales of 8 thousand cubic feet (Mcf) per 1 barrel of oil (bbl)): for a vertical well, ten thousand (10,000) BOE; for a short horizontal well, twenty-five thousand (25,000) BOE; and for a horizontal well, fifty thousand (50,000) BOE. | |||||||||||||||||||||
In connection with the closing of the Company’s acquisition of the Mississippian Asset, pursuant to a letter agreement with STXRA dated March 25, 2013, as amended, the Company is obligated to pay STXRA a completion fee of $507,221 (equal to $75.00 per net acre acquired in the Mississippian Asset (the “Completion Fee”)), based on the 6,763 net acres acquired, which is payable 80% in cash and 20% in the Company’s common stock, or $405,777 in cash and $101,444 in common stock (the “Equity Consideration”). The Company recorded an account payable and a corresponding asset to oil and gas properties, not subject to amortization on March 25, 2013 in the accompanying balance sheet for $507,221. STXRA originally identified the Mississippian Asset acquisition opportunity for the Company, and provided acquisition and due-diligence related consulting services to the Company, with their sole compensation being the Completion Fee. | |||||||||||||||||||||
The Company issued to STXRA 33,815 shares of common stock on July 11, 2013 valued at $109,899 on the grant date for the Equity Consideration. The Company recorded a loss on settlement of payable of $8,455. On March 7, 2014, the remaining payable to STXRA was satisfied in full through the issuance to STXRA of 190,000 shares of common stock valued at $444,600 on the grant date and recognized a loss on settlement of payable of $38,823. | |||||||||||||||||||||
On March 7, 2014, the Company entered into a series of transactions and agreements with RJ Resources Corp. (“RJ Corp.”). The effective result of these transactions and agreements included the sale of 50% of the Company’s interests in the Mississippian Asset to RJ Corp. See Note 19. | |||||||||||||||||||||
Guijarral Hills Exploitation Project | |||||||||||||||||||||
In October 2010, Blast entered into Farmout Agreement with Solimar Energy LLC (“Solimar”), to participate in an exploration project in the Guijarral Hills Field located in the San Joaquin basin of central California. In 2011, an initial exploratory well (the “Solimar Well”) was drilled on the project, but the zones tested did not result in an oil-producing well. On August 6, 2012, Solimar notified its desire to assign the Solimar Well to Vintage Production California LLC (“Vintage”), the lessor of the well in return for payment of the salvage value of the equipment in the Solimar Well. The Company elected to give up its right to take over the well and all related plugging and abandonment obligations, and agreed to assign its interest in the well to Vintage. On October 1, 2013, the Company quitclaimed all of its right, title and interest in the Solimar Well to Vintage. In connection with the allocation of the purchase price in the Merger, no value was attributed to the Guijarral Project. | |||||||||||||||||||||
Acquisition of Eagle Ford Assets | |||||||||||||||||||||
On March 29, 2012, the Company acquired Excellong E&P-2, Inc., a Texas corporation for a total purchase price of $3.75 million. Excellong E&P-2’s sole asset was an approximately 8% working interest in certain oil and gas leases covering approximately 1,650 net acres in the Leighton Field located in McMullen County, Texas, which is currently producing oil and natural gas from the Eagle Ford shale formation (the “Eagle Ford Asset”). The purchase was accounted for as a business combination; however, the Company acquired no other assets or liabilities other than the working interests and tangible equipment associated with producing wells. | |||||||||||||||||||||
Upon acquisition in March 2012, this area was producing oil and natural gas from two wells, with the remainder of the acreage under development. The purchase price terms were: | |||||||||||||||||||||
Cash paid at closing | $ | 1,500,000 | |||||||||||||||||||
Loan payable | 1,000,000 | -1 | |||||||||||||||||||
Series A Preferred Stock issued | 1,250,000 | -2 | |||||||||||||||||||
Total purchase price | $ | 3,750,000 | |||||||||||||||||||
-1 | Payable in 60 days following the closing. The amount was paid in May 2012 by an affiliate of MIE Holdings as consideration for the White Hawk sale described below. | ||||||||||||||||||||
-2 | The Company issued 555,556 shares of Series A Preferred Stock at a grant date fair value of $1,250,000. In accordance with the purchase agreement, the Company has 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 is less than $1,250,000, and the sellers demand repurchase. Accordingly, the Company has determined that the shares are redeemable at the option of the holder and has classified the Preferred Stock outside of shareholders’ equity on the accompanying balance sheet. | ||||||||||||||||||||
The following table summarizes the allocation of the aggregate contribution as follows: | |||||||||||||||||||||
Asset: | Valuation | ||||||||||||||||||||
Tangible equipment | $ | 147,000 | |||||||||||||||||||
Proved oil and gas reserves | 2,958,936 | ||||||||||||||||||||
Unproved oil and gas leaseholds | 629,050 | ||||||||||||||||||||
Total | $ | 3,734,986 | |||||||||||||||||||
On May 11, 2012, the Company merged its wholly-owned subsidiary, Excellong E&P-2, Inc. (“E&P-2”), into White Hawk Petroleum, LLC (“White Hawk”), a newly-formed Nevada limited liability company also wholly-owned by the Company (the “E&P-2 Merger”). The separate corporate existence of E&P-2 ceased as a result of the E&P-2 Merger. White Hawk then held all of the Eagle Ford Assets of the Company. The transaction among entities under common control was recorded at historical cost and no gain or loss was recognized. The assets transferred from E&P-2 to White Hawk amounted to $147,000 for tangible equipment and $2,958,936 for proved oil and gas reserves and $629,050 for unproved oil and gas leaseholds (total Eagle Ford E&P-2 property value of $3,734,986). The amount of production, depletion and depreciation between the acquisition date and the merger date was not material over this period. | |||||||||||||||||||||
On May 23, 2012, the Company completed the sale of 50% of the common stock of White Hawk (the “White Hawk Sale”) to an affiliate of MIE Holdings, which is also the Company’s 80% partner in Condor and a significant investor in the Company. As a result of the White Hawk Sale, an affiliate of MIE Holdings and the Company each had an equal 50% ownership interest in White Hawk and each agreed to proportionately share all expenses and revenues with respect to the Eagle Ford Asset. The sale price consideration for the White Hawk Sale by the affiliate of MIE Holdings was $1,939,082 as follows: | |||||||||||||||||||||
Cash received at closing | $ | 500,000 | |||||||||||||||||||
Cash received on June 29, 2012 | 500,000 | ||||||||||||||||||||
Payment to Excellong E&P-2 | 1,000,000 | -1 | |||||||||||||||||||
Total cash consideration | 2,000,000 | ||||||||||||||||||||
Less: fair value of warrants issued at $3.75 per share | -1,586 | -2 | |||||||||||||||||||
Less: fair value of warrants issued at $4.50 per share | -1,000 | -2 | |||||||||||||||||||
Less: purchase price adjustment for net field income activity for March 2012 through sale date | -58,332 | -3 | |||||||||||||||||||
Total sale price | $ | 1,939,082 | |||||||||||||||||||
-1 | $1.0 million in cash paid directly to the original sellers of E&P-2 on behalf of the Company on May 23, 2012, which was the amount due to such sellers 60 days following the acquisition; | ||||||||||||||||||||
-2 | On May 23, 2012, the Company issued 166,667 warrants valued at $1,586 to purchase common stock at $3.75 per share exercisable in cash for a period of two years and an additional 166,667 warrants valued at $1,000 to purchase common stock at $4.50 per share exercisable in cash for a period of two years; and | ||||||||||||||||||||
-3 | The effective date of the sale was March 1, 2012. Accordingly, production activity from the effective date until the closing date is reflected as a purchase price adjustment. | ||||||||||||||||||||
The following table summarizes the allocation of the aggregate sale price as follows: | |||||||||||||||||||||
Asset: | Valuation | ||||||||||||||||||||
Tangible equipment | $ | 76,015 | |||||||||||||||||||
Proved oil and gas reserves | 1,863,067 | ||||||||||||||||||||
Total | $ | 1,939,082 | |||||||||||||||||||
In connection with the White Hawk Sale, the Company recorded a gain of $64,168 representing the difference between the Company’s carrying value of the 50% interest sold ($1,875,000) and the fair value of the net sale proceeds received from MIE Holdings ($1,939,168). | |||||||||||||||||||||
The pro forma results of the White Hawk sale as if the transaction had occurred at January 1, 2012 is: | |||||||||||||||||||||
For the Year Ended | |||||||||||||||||||||
31-Dec-12 | |||||||||||||||||||||
PEDEVCO | E&P-2 | Combined | |||||||||||||||||||
Revenue | $ | 503,153 | $ | 266,867 | $ | 770,020 | |||||||||||||||
Lease operating costs | $ | (281,103 | ) | $ | (44,099 | ) | $ | (325,202 | ) | ||||||||||||
Net loss | $ | (12,013,011 | ) | $ | 222,768 | $ | (11,790,243 | ) | |||||||||||||
Net loss per common share | $ | (0.65 | ) | $ | 0.02 | $ | (0.63 | ) | |||||||||||||
White Hawk Acquisition | |||||||||||||||||||||
On December 20, 2013, White Hawk effected a two-step transaction to divest 50% of the assets held by White Hawk and acquire MIEJ’s interests in White Hawk from the proceeds of the sale. | |||||||||||||||||||||
On December 20, 2013, White Hawk sold 50% of its oil and gas properties to Millennial PDP Fund IV, LP (“Millennial”), a third party, pursuant to a Purchase and Sale Agreement (the “Sale Agreement”) for net proceeds of $2,654,602. The transaction was recorded as a sale of properties and White Hawk recorded a loss on sale of $161,712. | |||||||||||||||||||||
White Hawk used the proceeds of the sale plus 50% of White Hawk’s cash balance to pay MIEJ for its share of ownership in White Hawk and in settlement of the outstanding balance of its Promissory Note dated June 4, 2012 to MIEJ. MIEJ then withdrew from White Hawk as a member on December 31, 2013. As a result of the transactions, the Company became the 100% owner of White Hawk, and the Company recorded $124,301 of contributed capital from MIEJ. | |||||||||||||||||||||
Upon the completion of the redemption and withdrawal of MIEJ’s 50% interest in White Hawk on December 31, 2013, the Company became the sole member of White Hawk and the Company’s net ownership in the Eagle Ford shale assets held through White Hawk prior to the transactions remained unchanged and unaffected as a result of the transactions. Accordingly, as of December 31, 2013, the Company began accounting for White Hawk as a consolidated subsidiary of the Company and no longer accounts for the entity as an equity investment. | |||||||||||||||||||||
The following table summarizes the estimated fair values of the net assets recorded upon consolidation of White Hawk on December 31, 2013. | |||||||||||||||||||||
Fair value at December 31, 2013 | |||||||||||||||||||||
Current assets | $ | 202,068 | |||||||||||||||||||
Oil and gas properties, subject to amortization | 1,995,640 | ||||||||||||||||||||
Oil and gas properties, not subject to amortization | 734,370 | ||||||||||||||||||||
Total assets | 2,932,078 | ||||||||||||||||||||
Current liabilities | 21,430 | ||||||||||||||||||||
Note payable - PEDEVCO | 1,257,996 | ||||||||||||||||||||
Asset retirement obligations | 14,460 | ||||||||||||||||||||
Total liabilities | 1,293,886 | ||||||||||||||||||||
Total fair value of net assets | $ | 1,638,192 | |||||||||||||||||||
As the Company gained control over White Hawk on December 31, 2013, the carrying value of the Company’s membership interest in White Hawk was remeasured to fair value in accordance with ASC 805, Business Combinations. The following table summarizes the carrying value and estimated fair value of the Company’s membership interest in White Hawk as of December 31, 2013 and the resulting loss on remeasurement of $515,314, which has been recognized in the loss from equity investment in the accompanying consolidated statements of operations: | |||||||||||||||||||||
Fair value at December 31, 2013 | $ | 1,638,192 | |||||||||||||||||||
Carrying value of White Hawk membership interest | 2,153,506 | ||||||||||||||||||||
Loss on remeasurement of equity method investment | $ | (515,314 | ) | ||||||||||||||||||
The fair value of the Company’s existing membership interest in White Hawk has been determined based on the subsequent sale of the oil and gas properties of White Hawk on February 19, 2014. | |||||||||||||||||||||
The Company did not record any revenues or expenses of White Hawk in its consolidated statements of operations as the transaction occurred on December 31, 2013. The following table presents the Company’s supplemental consolidated pro forma total revenues, lease operating costs, net income (loss) and net loss per common share as if the acquisition of White Hawk had occurred on January 1, 2013. | |||||||||||||||||||||
For the Year Ended | |||||||||||||||||||||
31-Dec-13 | |||||||||||||||||||||
PEDEVCO | White Hawk | -1 | Combined | ||||||||||||||||||
Revenue | $ | 743,656 | $ | 471,153, | $ | 1,214,809 | |||||||||||||||
Lease operating costs | $ | (648,462 | ) | $ | (86,128 | ) | $ | (734,590 | ) | ||||||||||||
Net income (loss) | $ | (18,213,883 | )(2) | $ | (412,691 | ) | -3 | $ | (18,626,574 | ) | |||||||||||
Net loss per common share | $ | (1.07 | ) | $ | - | $ | (1.10 | ) | |||||||||||||
-1 | The revenues, lease operating expenses and net income presented for White Hawk represents the amounts attributable to the net assets acquired as of December 31, 2013 subsequent to the sale of 50% of the assets to Millennial. | ||||||||||||||||||||
-2 | Net loss of PEDEVCO was adjusted by $22,799 in interest income related to the note receivable held by PEDEVCO from White Hawk and loss from equity investment of $424,091 in White Hawk, that would have been eliminated upon consolidation of White Hawk. | ||||||||||||||||||||
-3 | Net loss of White Hawk was adjusted by $22,799 in interest expense related to the note receivable held by PEDEVCO from White Hawk, that would have been eliminated upon consolidation of White Hawk. | ||||||||||||||||||||
On February 19, 2014, White Hawk closed an agreement with Millennial PDP Fund IV, LP to sell its remaining interests in the Eagle Ford Shale assets to Millennial PDP Fund IV, LP for net proceeds of $2,718,158. See Note 19. The Company recognized no gain or loss on the disposition of oil and gas properties. | |||||||||||||||||||||
6_DEPOSIT_FOR_BUSINESS_ACQUISI
6. DEPOSIT FOR BUSINESS ACQUISITION | 12 Months Ended |
Dec. 31, 2013 | |
Business Combinations [Abstract] | ' |
DEPOSIT FOR BUSINESS ACQUISITION | ' |
On September 16, 2013, the Company entered into a Share Subscription Agreement (“SSA”) to acquire an approximate 51% ownership in Asia Sixth, which holds an approximate 60% ownership interest in Aral. Aral holds a 100% operated working interest in a production license issued by the Republic of Kazakhstan that expires in 2034 in western Kazakhstan (the “Contract Area”). The Contract Area covers 380,000 acres within the North Block located in the Pre-Caspian Basin. | |
Under the SSA, the Company plans to acquire an interest in Aral through the acquisition of a 51% interest in Asia Sixth, by way of subscription of shares of Asia Sixth, which in turn currently holds a 60% controlling interest in Aral. Asia Sixth’s interest in Aral is scheduled to increase to 66.5% following the completion of certain transactions to occur between Asia Sixth and Asia Sixth’s partner in Aral that currently holds the remaining 40% interest in Aral (the “Aral Transactions”). Upon closing and completion of the Aral Transactions, Aral will be owned 66.5% by Asia Sixth. | |
The Company paid an initial deposit of $8 million in September 2013 and a subsequent deposit of $2 million in October 2013 to Asia Sixth, and was required to increase its deposit by up to $10 million to a total of $20 million contingent upon receipt of payment in full to the Company from an investor under a promissory note maturing in December 2013. The investor failed to pay the $10 million balance due under the Note by December 1, 2013, On December 1, 2013, the Company granted a verbal extension to the investor pending further discussions regarding the investment. Following discussions with the investor, the investor elected to forego making further investment. Accordingly, on March 7, 2014, the Company notified the investor that, effective immediately, the Escrowed Shares and Escrowed Warrants were rescinded as permitted pursuant to the terms of the Note, and the Note was cancelled and forgiven, with no further action required by the investor (the “Cancellation”). The stock subscription receivable related to 3,333,333 shares of common stock and 999,999 warrants for shares of common stock in the amount of $10 million was extinguished as of March 7, 2014. The rescission of the note has no net effect on us or our obligations under the Share Subscription Agreement because (a) if such note was paid in full we would have been required to pay such funds directly to Asia Sixth; and (b) the result of such funds not being paid only results in a decrease in the required deposit due to Asia Sixth. | |
The $10 million deposit is subject to full refund to the Company in the event the transaction does not close, other than as a result of the Company’s material uncured breach. These funds have been or will be used, in part, to recomplete and rework currently producing wells with the goal of significantly increasing their production rates. Based on how these wells perform, at closing, the Company shall owe to Asia Sixth a final closing payment equal to an additional: (i) $20 million if the daily average volume of oil produced by Aral over a specified 30 day period (the “Target Volume”) equals or exceeds 1,500 barrels of oil per day (“BOPD”); (ii) $15 million if the Target Volume equals or exceeds 1,000 BOPD but is less than 1,500 BOPD; or (iii) $0 due if the Target Volume comes in less than 1,000 BOPD. | |
Upon closing, the Company and the other shareholders of Asia Sixth will enter into a shareholders agreement, pursuant to which the shareholders will agree to certain restrictions on the transfer of their interests in Asia Sixth, certain pre-emption rights in the event a shareholder desires to transfer its interests in Asia Sixth, certain information rights, and certain other rights, including, but not limited to, certain management and control provisions, including: (i) the Company’s right to nominate two (2) of the five (5) directors of Asia Sixth, subject to the Company maintaining at least a 25% ownership of Asia Sixth; (ii) the Company’s right to nominate one (1) additional of the five (5) directors of Asia Sixth, subject to the Company maintaining at least a 51% ownership of Asia Sixth; (iii) the Company’s right to designate the Chairman of Asia Sixth from among its directors appointed to the Asia Sixth Board; and (iv) the appointment of two (2) of the Asia Sixth directors designated by the Company to the five (5) member Supervisory Council of Aral. | |
On March 7, 2014, the Company entered into a series of transactions and agreements with RJ Corp. The effective result of these transactions and agreements included the sale of 50% of the Company’s interest in the Aral Transactions. Pursuant to the Asia Sixth Purchase Agreement in March 2014 between RJ Corp. and the Company, RJ Corp. is obligated to pay 50% of any final closing payment due to Asia Sixth. See Note 19. | |
7_EQUIPMENT
7. EQUIPMENT | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
EQUIPMENT | ' | ||||||||
Property and equipment as of December 31, 2013 and, 2012 consisted of the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Computer equipment | $ | 6,714 | $ | 6,714 | |||||
Tractor | - | - | |||||||
Service trailer | - | - | |||||||
AFJ Rig | 112,089 | 112,089 | |||||||
Subtotal | 118,803 | 118,803 | |||||||
Less: | |||||||||
Accumulated depreciation | (118,803 | ) | (30,920 | ) | |||||
Equipment, net | $ | - | $ | 87,883 | |||||
The AFJ rig, tractor and service trailer were acquired in the Merger transaction. In connection with the Merger, the Company evaluated the carrying value of the AFJ rig and, based upon the independent third party analysis, recorded the estimated fair value of the AFJ rig at $112,089 at the date of the merger, reflecting a reduction in the carrying value at $254,000. | |||||||||
Depreciation expense for the year ended December 31, 2013 and the period from inception to December 31, 2012 was $87,884 and $30,258, respectively, and are included in operating expenses in the accompanying statement of operations. |
8_NOTES_RECEIVABLE
8. NOTES RECEIVABLE | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Receivables [Abstract] | ' | |||||||||
NOTES RECEIVABLE | ' | |||||||||
Condor Energy Technology, LLC | ||||||||||
The Company loaned Condor funds for operations pursuant to a promissory note entered into on February 14, 2013, with an effective date of November 1, 2012, which note permits multiple loans to be made thereunder up to $8,000,000 as separate “advances”. The note receivable bears interest at a rate per annum equal to the one (1) month LIBOR rate for U.S. dollar deposits plus four (4.0) percentage points. Principal and interest are due thirty-six (36) months from the date each advance is made under the note, with the first repayment being due September 24, 2015. As of December 31, 2013, the balance of the note receivable is $5,005,108 plus accrued interest of $188,469 due from Condor. As of December 31, 2013, there was $2,994,892 available to Condor to borrow under this agreement. Note receivable activity: | ||||||||||
Date of Advance | Maturity Date | 2013 | 2012 | |||||||
Balance as of beginning of year | $ | 1,419,253 | $ | - | ||||||
24-Sep-12 | 24-Sep-15 | - | 276,326 | |||||||
1-Nov-12 | 1-Nov-15 | - | 1,142,927 | |||||||
4-Jan-13 | 4-Jan-16 | 1,297,038 | - | |||||||
11-Jan-13 | 11-Jan-16 | 1,011,250 | - | |||||||
30-Jun-13 | 30-Jun-16 | 134,479 | - | |||||||
31-Jul-13 | 31-Jul-16 | 203,088 | - | |||||||
31-Dec-13 | 31-Dec-16 | 940,000 | - | |||||||
Balance at end of year | $ | 5,005,108 | $ | 1,419,253 | ||||||
The Company's share of Condor’s losses from operations in 2013 were greater than the residual value of the Company’s investment in Condor of $160,353. Accordingly, the carrying amount of the note receivable and accrued interest presented on the accompanying financial statements was reduced by $5,193,577 as a valuation allowance for the Company’s share of losses from Condor for the year ended December 31, 2013. | ||||||||||
White Hawk Petroleum, LLC | ||||||||||
The Company loaned White Hawk funds for operating expenses and drilling and completion costs for four additional Eagle Ford wells, pursuant to a promissory note entered into on June 4, 2012, which note permits multiple loans to be made thereunder as separate “advances”, with no stated maximum limit of loan principal. The note receivable bears interest at a rate per annum equal to the one (1) month LIBOR rate for U.S. dollar deposits plus four (4.0) percentage points. Principal and interest of each loan is due thirty-six (36) months from the date each advance is made under the note, with the first repayment being due June 4, 2015. As of December 31, 2013, the balance of the note receivable is $1,252,393. As of December 31, 2013, White Hawk became a wholly-owned subsidiary of the Company and this amount was eliminated in consolidation. |
9_EQUITY_METHOD_INVESTMENTS
9. EQUITY METHOD INVESTMENTS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Equity Method Investments and Joint Ventures [Abstract] | ' | ||||||||
EQUITY METHOD INVESTMENTS | ' | ||||||||
Condor Energy Technology, LLC | |||||||||
In October 2011, the Company formed a new subsidiary, Condor Energy Technology LLC (“Condor”), a limited liability company organized under the laws of the State of Nevada. The Company owns 20% of Condor and a subsidiary of MIE Holdings Corporation (“MIE Holdings”) owns 80%. | |||||||||
The Company accounts for its 20% ownership in Condor using the equity method. The Company evaluated its relationship with Condor to determine if Condor was a variable interest entity (“VIE”) as defined in ASC 810-10, and whether the Company was the primary beneficiary of Condor, in which case consolidation with the Company would be required. The Company determined that Condor qualified as a VIE, however, the Company concluded that MIE Holdings was the primary beneficiary as a result of being in control of the Board and its ability to control the funding commitments to Condor. The following table reflects the activity related to the equity investment: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Beginning balance | $ | 160,353 | $ | 588,453 | |||||
Contributions | - | - | |||||||
Equity in net loss at 20% | (5,353,930 | ) | (428,100 | ) | |||||
Notes receivable from Condor | 5,193,577 | - | |||||||
Ending balance | $ | - | $ | 160,353 | |||||
As of December 31, 2013, the Company has a note receivable of $5,005,108 plus accrued interest of $188,469 due from Condor. | |||||||||
As of December 31, 2013, the Company has unrecognized losses of $272,637 in excess of its basis in Condor. | |||||||||
The Company is subject to recording its 20% proportionate share of Condor’s income or losses. The Company is obligated to maintain, under the membership agreement of Condor, its proportionate share of capital contributions. Below is summarized financial information for Condor. | |||||||||
Summarized balance sheets: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Current assets | $ | 4,224,369 | $ | 5,182,717 | |||||
Oil and gas properties, net | 3,533,915 | 9,742,120 | |||||||
Other long –term assets | 108,000 | 1,078,220 | |||||||
Total assets | $ | 7,866,284 | $ | 16,003,057 | |||||
Current liabilities | $ | 3,708,123 | $ | 2,952,710 | |||||
Notes payable to affiliates | 31,477,643 | 12,240,161 | |||||||
Other long term liabilities | 11,587 | 8,420 | |||||||
Total liabilities | 35,197,353 | 15,201,291 | |||||||
Members’ equity (deficit) | (27,331,069 | ) | 801,766 | ||||||
Total liabilities and members’ equity (deficit) | $ | 7,866,284 | $ | 16,003,057 | |||||
Summarized statements of operations: | |||||||||
For the Year Ended December 31, | For the Year Ended December 31, | ||||||||
2013 | 2012 | ||||||||
Revenue | $ | 4,779,966 | $ | 653,802 | |||||
Lease operating expenses | (1,850,818 | ) | (424,872 | ) | |||||
Exploration costs | (365,938 | ) | -759,857 | ||||||
Selling, general and administrative expenses | (1,111,912 | ) | -806,285 | ||||||
Depletion | (2,679,676 | ) | (220,412 | ) | |||||
Impairment of oil and gas properties | (25,982,745 | ) | (369,037 | ) | |||||
Interest expense | (921,712 | ) | -213,839 | ||||||
Net loss | $ | (28,132,835 | ) | $ | -2,140,500 | ||||
The Company has an agreement to provide management services to Condor for which Condor owes $75,131 and $81,124 at December 31, 2013 and 2012, respectively. Total fees billed to Condor were $667,054 and $363,102 in 2013 and 2012, respectively. | |||||||||
Condor owes the Company $47,076 and $112,488 at December 31, 2013 and 2012, respectively, from production sales related to the Company’s working interests in the Niobrara Asset. | |||||||||
The Company owes Condor $59,448 and $112,069 from production related expenses and $2,278,266 and $802,614 related to capital expenditures incurred by Condor for the drilling of wells during the year ended December 31, 2013 and 2012, respectively. | |||||||||
The Company's 20% equity share of Condor's losses for the year ended December 31, 2013 were $5,626,567. These losses exceeded the Company's investment at risk of $160,353. In accordance with ASC 323-10-35, the Company recorded $5,193,577 of the excess losses against the Company's note receivable and accrued interest. The remaining excess of $272,637 attributable to the Company has not been recorded. Accordingly, any future investment in Condor by the Company or equity share of future net income in Condor's operations will be offset by the unrecorded excess losses. | |||||||||
White Hawk Petroleum, LLC | |||||||||
For all periods up to December 31, 2013, the Company accounted for its 50% ownership in White Hawk using the equity method. As a result of White Hawk’s series of transactions described in Note 5, on December 31, 2013, the Company began accounting for White Hawk as a consolidated subsidiary of the Company and no longer accounts for the entity as an equity investment. | |||||||||
The Company evaluated its relationship with White Hawk prior to the withdrawal of MIEJ to determine if White Hawk was a variable interest entity (“VIE”) as defined in ASC 810-10, and whether the Company was the primary beneficiary of White Hawk, in which case consolidation with the Company would have been required prior to December 31, 2013. The Company determined that White Hawk qualified as a VIE, however the Company concluded that MIE Holdings was the primary beneficiary as a result of its ability to control the funding commitments to White Hawk. The Company’s entire investment in White Hawk is at risk of loss. The following table reflects the activity related to the equity investment: | |||||||||
31-Dec-13 | December 31, 2012 | ||||||||
Beginning balance | $ | 1,937,981 | $ | 3,734,986 | |||||
Sale of equity investment | - | (1,867,493 | ) | ||||||
Equity in net earnings at 50% | 91,223 | 70,488 | |||||||
Forfeiture of MIE’s capital account recorded in additional paid-in capital | 124,301 | - | |||||||
Remeasurement of equity method invesment upon consolidation | (515,314 | ) | - | ||||||
Consolidation of equity investment | -1,638,191 | - | |||||||
Ending balance | $ | - | $ | 1,937,981 | |||||
As of December 31, 2012, the Company had a note receivable of $332,974 plus accrued interest of $460 due from White Hawk. As of December 31, 2013, the Company had a note receivable of $1,252,393 plus accrued interest of $5,603 due from White Hawk, though this receivable was eliminated in consolidation following the withdrawal of MIEJ from White Hawk. | |||||||||
10_NOTES_PAYABLE
10. NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2013 | |
Debt Disclosure [Abstract] | ' |
NOTES PAYABLE | ' |
Bridge Note Financing | |
On March 22, 2013, the Company closed a private placement of secured promissory notes (the “Bridge Notes”) for an aggregate principal amount of $4.0 million, together with warrants exercisable for a total of up to 76,198 shares of its common stock at an exercise price of $5.25 per share (the “Bridge Warrants,” and, together with the Bridge Notes, the “Bridge Securities”). At the closing of the bridge financing (the “Bridge Financing”), the Company entered into separate Note and Warrant Purchase Agreements with a total of 16 individual and institutional investors (collectively, the “Bridge Investors”), including ten (10) current Company shareholders, in which the Company sold and issued to the Bridge Investors a total of $4.0 million of Bridge Notes and Bridge Warrants to purchase 76,198 shares of the Company’s common stock (the "Note and Warrant Purchase Agreements") for gross proceeds of $4.0 million. The fair value of the warrants was $256,857 which was recorded as a debt discount. | |
Frank C. Ingriselli, the Company’s President, Chief Executive Officer, and member of the Company’s Board of Directors, participated in the Bridge Financing, purchasing Bridge Notes of $1 million and receiving Bridge Warrants exercisable for 19,048 shares of the Company’s common stock, and Clark R. Moore, the Company’s Executive Vice President and General Counsel, purchased Bridge Notes of $50,000 and received Bridge Warrants exercisable for 953 shares of the Company’s common stock, respectively. | |
Somerley Limited (“Somerley”) acted as the Company’s placement agent with respect to a portion of the Bridge Financing sold to non-U.S. investors. As compensation, Somerley received total cash fees of $40,000 and Bridge Warrants to purchase a total of up to 9,524 shares of the Company’s common stock at an exercise price of $5.25 per share valued at $32,095 using a Monte Carlo simulation model. The Company capitalized these amounts as deferred financing costs and will be amortized over the expected life of the Bridge Financing as modified to July 31, 2014. Interest expense for the year ended December 31, 2013 was $69,984. | |
Terms of the Bridge Notes | |
The proceeds of the Bridge Financing were used by the Company for (i) the acquisition of the Mississippian asset; (ii) up to $300,000 to acquire an exclusive option to acquire leases and 3D seismic data in the Mississippian formation covering up to an additional 7,880 gross (7,043 net) acres located in Harper, Kiowa, Barber and Comanche Counties, Kansas, and Woods County, Oklahoma; (iii) the payment of placement agent fees; and (iv) general working capital expenses. | |
The Bridge Notes have an annual interest rate of 10% and are due and payable on the earlier to occur of (i) the date that is thirty (30) days following the closing of the Company’s next underwritten public offering of the Company’s common stock, or (ii) December 31, 2013 (the “Maturity Date”). The Company may, in its sole discretion, repay the Bridge Notes in whole or in part at any time prior to the Maturity Date. The Bridge Notes are secured by a lien and security interest in all of the Company’s assets, subject to a senior lien on the Company’s Niobrara assets held by MIEJ, an affiliate of MIE Holdings, which secures MIEJ’s loans to date under the Note with MIEJ described below. | |
Upon maturity, the Company is obligated to pay to the holders an additional payment-in-kind (“PIK”) cash amount equal to 10% of the original principal amount of the Bridge Notes, or $400,000. If an event of default on the Bridge Notes occurs, the principal amount of the Bridge Notes, plus accrued and unpaid interest and the PIK, if any, may be declared immediately due and payable, subject to certain conditions such as bankruptcy or insolvency. | |
Terms of the Bridge Warrants | |
The Bridge Warrants are exercisable for shares of the Company’s common stock for a period of four (4) years from their issuance date, at an exercise price of $5.25 per share; provided, however, that the exercise price shall be adjusted to the price per share at which the Company issues common stock in the Company’s next underwritten public offering of common stock, if such price per share is lower than $5.25 per share and such offering occurs within six months of the grant date. The Bridge Warrants may be exercised on a cashless basis. The Company determined that these warrants contain provisions that protect holders from future issuances of the Company’s common stock at prices below such warrants’ respective exercise prices and these provisions could have resulted in modification of the warrants’ exercise price based on a variable that is not an input to the fair value of a “fixed-for-fixed” option. Such warrants were recognized as derivative warrant instruments at issuance and are measured at fair value at each reporting period. The Company determined the fair value of these warrants was $14,005 using a Monte Carlo simulation valuation model in the period ended March 31, 2013. The Company subsequently determined, as a public offering was not closed prior to the six month expiration of any possible exercise price adjustment on September 22, 2013, that the exercise price of the warrants would not be reset and the derivative feature of the warrants has no value as of the year ended December 31, 2013. | |
Modification of Bridge Notes | |
On December 16, 2013, the Company entered into an amendment to the secured promissory notes (the “Amended Notes”) with each of the Bridge Investors of the Bridge Notes. The Amended Notes provide for (i) the extension of the maturity date of such Bridge Notes, which were originally due on December 31, 2013, to July 31, 2014 (the “New Maturity Date”), (ii) the subordination of the Bridge Notes to certain future qualified senior indebtedness of the Company with a principal amount of at least $5.0 million, (iii) the payment in full of all accrued interest through January 8, 2014 (the “Payment Date”), equal to an aggregate of $294,795 due and payable to the Bridge Investors on the Payment Date, (iv) the payment in full of the $400,000 PIK on the original principal amount of such Bridge Notes on the Payment Date (v) the repayment of either none or 50% of the outstanding principal amount due under such Bridge Notes, as elected by the holders on the Payment Date, of which principal repayment of $1,625,000 shall be due and payable to the Bridge Investors on the Payment Date as elected by the holders, (vi) the amendment of the interest rate of such Bridge Notes for the Amended Notes from 10% per annum to 12% per annum with respect to the remaining unpaid principal amount of the Bridge Notes (the “Deferred Principal”), and (vii) an additional payment-in-kind cash amount equal to 10% of the Deferred Principal due on the New Maturity Date (the “Additional PIK”). In total, eleven (11) Bridge Investors holding Bridge Notes with an aggregate principal amount outstanding of $3,250,000 elected to defer 50% of their principal, agreeing to defer an aggregate of $1,625,000 in principal amount of the Bridge Notes, and five (5) Bridge Investors holding Bridge Notes with an aggregate principal amount outstanding of $750,000 elected to defer 100% of their principal, for total deferred principal of $2,375,000, and an aggregate Additional PIK due upon the New Maturity Date of $237,500. The Company recorded the Additional PIK as a debt discount to the Amended Notes. | |
As additional consideration for the Amended Notes, the Company granted a new warrant (“New Warrant”) exercisable on a cashless basis at an exercise price of $2.34 per share for a number of shares of common stock of the Company equal to (i) double (2x) the number of shares issuable under the Bridge Warrant originally issued to each holder who agreed to defer 50% of the outstanding principal of its Bridge Note, and (ii) triple (3x) the number of shares issuable under the Bridge Warrant originally issued to each holder who agreed to defer 100% of the outstanding principal of its Bridge Note, for a total of New Warrants exercisable for an aggregate of 166,684 shares of Company common stock issued by the Company to the Bridge Investors. The New Warrants have a 4-year life and have substantially the same terms as the Bridge Warrants originally issued to the Bridge Investors. The New Warrants have a fair value of $181,475, calculated using the Black Scholes model. | |
Frank C. Ingriselli, the Company’s President, Chief Executive Officer, and member of the Company’s Board of Directors, agreed to defer $500,000 of the original $1.0 million principal amount outstanding under his Bridge Note, and on the Payment Date, the Company paid $73,699 in accrued interest and $100,000 in PIK amounts due, and repaid 50% of his outstanding principal amount of $500,000. Mr. Ingriselli received a New Warrant exercisable for 38,096 shares of the Company’s common stock valued at $41,064 on the grant date. Clark R. Moore, the Company’s Executive Vice President and General Counsel, agreed to defer $25,000 of the original $50,000 principal amount outstanding under his Bridge Note, and on the Payment Date, the Company paid $3,685 in accrued interest and $5,000 in PIK amounts due, and repaid 50% of his outstanding principal amount of $25,000. Mr. Moore received a New Warrant exercisable for 1,906 shares of the Company’s common stock valued at $2,055 on the grant date. | |
The Company accounted for the amendment to the notes with the Bridge Investors as a modification of debt under ASC 405-20, and, accordingly, the unamortized debt discount related to the PIK of $12,544 and debt discount of $8,055 related to the Bridge Warrants prior to the amendment of the notes with the Bridge Investors was amortized over the new expected term of the Amended Notes, which is July 2014. In addition, the amounts related to the New Warrants and Additional PIK will also be amortized as interest expense over the new expected term of the Amended Notes. | |
The unamortized debt discount related to the Bridge Warrants and New Warrants as of December 31, 2013, was $177,035. Interest expense related to the debt discount for the Bridge Warrants and New Warrants for the year ended December 31, 2013 was $261,296. The unamortized debt discount related to the PIK and Additional PIK reflected on the balance sheet as of December 31, 2013 was $233,521 and the interest expense related to the PIK and Additional PIK was $403, 979 for the year ended December 31, 2013. | |
Second Amendment to Bridge Notes and Subordination and Intercreditor Agreements | |
On March 7, 2014, the Company entered into a Second Amendment to Secured Promissory Notes (each, a “Second Amended Note,” and collectively, the “Second Amended Notes”) with all but one of the holders (each holder who agreed to such Second Amendment Notes, the “Amended Bridge Investors”). | |
The Second Amended Notes amended the Bridge Notes to allow the holders the right to convert up to 100% of the outstanding and unpaid principal amount (but in increments of not less than 25% of the principal amount of each Bridge Note outstanding as of the entry into the Second Amended Notes and only up to four (4) total conversions of not less than 25% each); the Additional PIK; and all accrued and unpaid interest under each Bridge Note (collectively, the “Conversion Amount”) into common stock of the Company, subject to an additional listing application regarding such common stock being approved by the NYSE MKT. Upon a conversion, the applicable holder shall receive that number of shares of common stock as is determined by dividing the Conversion Amount by a conversion price (the “Conversion Price”) as follows: | |
(A) prior to June 1, 2014, the Conversion Price shall be $2.15 per share; and | |
(B) following June 1, 2014, the denominator used in the calculation described above shall be the greater of (i) 80% of the average of the closing price per share of the Company’s publicly traded common stock for the five (5) trading days immediately preceding the date of the conversion notice provided by the holder; and (ii) $0.50 per share. | |
Additionally, each Bridge Investor entered into a Subordination and Intercreditor Agreement in favor of BAM Administrative Services LLC (the “Agent”), subordinating and deferring the repayment of the Bridge Notes until full repayment of certain senior notes. The Subordination and Intercreditor Agreements also prohibit us from repaying the Bridge Notes until certain senior notes have been paid in full, except that we are allowed to repay the Bridge Notes from net proceeds received from the sale of common or preferred stock (i) in calendar year 2014 if such net proceeds received in such calendar year exceeds $35,000,000, (ii) in calendar year 2015 if such net proceeds received in such calendar year exceeds $50,000,000, and (iii) in calendar year 2016 if such net proceeds actually received in such calendar year exceeds $50,000,000. | |
Frank C. Ingriselli, the Company’s President, Chief Executive Officer, and member of the Company’s Board of Directors, originally provided us $1.0 million in Bridge Notes (which was reduced to $500,000 in connection with payments made pursuant to the First Amendment) and Clark R. Moore, the Company’s Executive Vice President and General Counsel, originally provided us $50,000 in Bridge Notes (which was reduced to $25,000 in connection with payments made pursuant to the First Amendment), provided that prior to the Bridge Note Investors’ entry into the Amended Notes, Mr. Ingriselli and Mr. Moore transferred their Bridge Notes to non-affiliates of the Company and as such, as of the date of the Amended Notes, such officers no longer held any Bridge Notes or rights thereunder. See Note 19. | |
Centurion Note Conversions | |
On August 31, 2012, Centurion converted $101,250 of principal and accrued interest into 45,000 shares of the Company’s common stock. In October 2012, Centurion converted $536,250 of principal into 238,334 shares of the Company’s common stock. In November 2012, Centurion converted $392,045 of principal into 174,242 shares of the Company’s common stock. Centurion forgave the principal and interest balance of $169,181 and the balance owed Centurion at December 31, 2012 was paid in full. | |
Related Party Transactions | |
MIE Jurassic Energy Corporation | |
On February 14, 2013, the Company’s subsidiary, Pacific Energy Development Corp. (“PEDCO”) entered into a Secured Subordinated Promissory Note, as amended on March 25, 2013 and July 9, 2013 (the “Note”) with MIEJ, with an effective date of November 1, 2012. Under the Note, PEDCO may draw down multiple advances up to a maximum of $6.5 million under the Note, with repaid amounts not being permitted to be re-borrowed. Amounts borrowed under the Note were used by PEDCO to fund fees and expenses allocable to PEDCO with respect to its operations in the Niobrara Asset, Niobrara Asset-related acquisition expenses, and repayment of $432,433 due to Condor as a refund of the performance deposit paid by MIEJ to Condor with respect to the Mississippian Asset acquisition and applied toward the Company’s purchase price of the Mississippian Asset. When drawn, principal borrowed under the Note carries an interest rate of 10.0% per annum. Principal and accrued interest under the Note is due and payable within ten (10) business days of August 31, 2014. The Note may be prepaid in full by PEDCO without penalty, and is secured by all of PEDCO’s ownership and working interests in the FFT2H, Logan 2H, Waves 1H, State 16-7-60 1H and Wickstrom 18-2H wells located in the Niobrara Asset, and all corresponding leasehold rights pooled with respect to such wells, and PEDCO’s ownership and working interests in each future well drilled and completed in the Niobrara Asset. The Note converted amounts previously advanced by MIEJ to PEDCO in the amount of $2.17 million to fund operations in the Niobrara Asset through November 1, 2012, as well as an additional $2 million loaned by MIEJ to PEDCO under the Note on February 14, 2013 and $2 million loaned by MIEJ to PEDCO under the Note on March 25, 2013, for a total current principal amount outstanding under the Note of $6.17 million as of December 31, 2013. There is currently approximately $330,000 available for future borrowing by PEDCO under the Note. Further, the Company owes $585,777 in accrued interest at December 31, 2013 under the Note. | |
On March 7, 2014, the Company paid an aggregate of $516,192 as repayment in full of amounts due to Condor as a refund of the performance deposit paid by MIEJ to Condor with respect to the Mississippian Asset acquisition and applied toward our purchase price of the Mississippian Asset, and other Mississippian Asset acquisition related expenses. See Note 19. | |
11_DERIVATIVE_LIABILITIES
11. DERIVATIVE LIABILITIES | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||||
DERIVATIVE LIABILITIES | ' | ||||||||||||||||||||
The Company determined that certain warrants the Company had issued in connection with the Bridge Financing (as discussed in Note 10 – Bridge Financing) contained provisions that protected holders from future issuances of the Company’s common stock at prices below such warrants’ respective exercise prices and these provisions could have resulted in modification of the warrants’ exercise price based on a variable that was not an input to the fair value of a “fixed-for-fixed” option. The warrants issued in connection with the Bridge Financing contained anti-dilution provisions that provided for a reduction in the exercise price of such warrants in the event that the Company issued common stock in an underwritten public offering occurring within six (6) months following March 22, 2013, if the price per share of Company common stock issued in the underwritten public offering was less than the Exercise Price of the warrant (as adjusted prior to, or in connection with, such underwritten public offering pursuant to stock splits, stock dividends, reorganizations, mergers, consolidation or sales of assets), then the Exercise Price of the warrant would have been automatically adjusted to equal the offering price per share issued by the Company in the underwritten public offering, provided, however, that this was a one-time adjustment to occur only in connection with the Company’s first underwritten public offering consummated within six (6) months following March 22, 2013. Such warrants were recognized as derivative warrant instruments at issuance and are measured at fair value at each reporting period. The Company determined the fair values of these warrants using a Monte Carlo simulation valuation model in the period ended March 31, 2013. As a public offering was not closed prior to the six months expiration of any possible exercise price adjustment on September 22, 2013, the exercise price of the warrants was not reset and the derivative feature of the warrants had no value as of the period ending September 30, 2013. Activity for derivative warrant instruments during the year ended December 31, 2013, was as follows: | |||||||||||||||||||||
Description | Balance at | Initial valuation of derivative liabilities upon issuance | Decrease in fair | Exercise of | Balance at | ||||||||||||||||
December 31, | of warrants | value of derivative liability | warrants | December 31, | |||||||||||||||||
2012 | 2013 | ||||||||||||||||||||
Bridge Warrants | $ | - | $ | 14,005 | $ | (14,005 | ) | $ | - | $ | - | ||||||||||
Total | $ | - | $ | 14,005 | $ | (14,005 | ) | $ | - | $ | - | ||||||||||
The following is a summary of the assumptions used in the Monte Carlo simulation valuation model as of the initial valuation of the derivative warrant instruments issued on March 22, 2013: | |||||||||||||||||||||
Description | |||||||||||||||||||||
Common stock issuable upon exercise of warrants | 85,722 | ||||||||||||||||||||
Market value of common stock on date of measurement (1) | $ | 5.25 | |||||||||||||||||||
Adjusted exercise price | $ | 5.25 | |||||||||||||||||||
Risk free interest rate (2) | 0.6 | % | |||||||||||||||||||
Warrant lives in years | 4 | ||||||||||||||||||||
Expected volatility (3) | 85 | % | |||||||||||||||||||
Expected dividend yield (4) | 0 | % | |||||||||||||||||||
-1 | The market value of common stock is the stock price at the close of trading on the date of issuance or at period-end, as applicable. | ||||||||||||||||||||
-2 | The risk-free interest rate was determined by management using the 3 or 5 - year Treasury Bill as of the respective offering or measurement date. | ||||||||||||||||||||
-3 | Because the Company does not have adequate trading history to determine its historical trading volatility, the volatility factor was estimated by management using the historical volatilities of comparable companies in the same industry and region. | ||||||||||||||||||||
-4 | Management determined the dividend yield to be 0% based upon its expectation that it will not pay dividends for the foreseeable future. |
12_COMMITMENTS
12. COMMITMENTS | 12 Months Ended |
Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
COMMITMENTS | ' |
Office Lease | |
In July 2012, the Company entered into a non-cancelable lease agreement with a term of two years ending in July 2014 for its corporate office space located in Danville, California. The obligation under this lease as of December 31, 2013 is $28,987. | |
Niobrara Asset - $1 Million Guarantee | |
Under the Niobrara Asset purchase agreement in 2012, the Company agreed to issue 444,445 shares of Series A Preferred Stock on November 13, 2012, subject to a guaranteed minimum value of $1 million of the preferred stock, to the parties that sold the asset to the Company (the “Sellers”). On November 13, 2012, the Sellers had the option to elect to receive the fixed number of 444,445 shares or $1 million in cash, due and payable within five days of their written election to receive cash in lieu of the shares. The agreement does not provide the Sellers the option for a variable number of shares based on the per share value. The obligation of $1 million was recorded in accrued expenses on the date of the transaction. The Company received elections from the Sellers requesting payment of the obligation in cash due on or about November 20, 2012. On November 26, 2012, the Agreement was amended to provide for the payment of $100,000 to the Sellers, and 44,445 shares of the preferred stock valued at $100,000 to extend the $1 million payment until February 18, 2013. The fair value of $280,001 of the 44,445 preferred shares issued and the $100,000 payment were recorded as interest expense in 2012. The Company subsequently paid the $1 million due on February 18, 2013. | |
Drilling Commitments | |
Our oil and gas leasehold acreage is subject to expiration of leases if we do not drill and hold such acreage by production. In the Niobrara asset 181 net acres expire in 2014, 21 net acres expire in 2015, 169 net acres expire in 2016 and 588 net acres expire thereafter. We plan to hold significantly all of this acreage through an active program of drilling and completing producing wells. Where we are not able to drill a well before lease expiration we will seek to extend leases where able. All “net” acreage reflects our acreage held directly and our 20% proportionate share of acreage held by Condor by virtue of our 20% ownership interest in Condor. In addition, all of our net acres in the Mississippian asset will expire in 2014 if we do not drill at least three (3) long horizontal wells in the asset by December 29, 2014. As of March 2014, we no longer hold any assets in the Eagle Ford formation. If our extension options expire and we have to renew such leases on new terms, we could incur significant cost increases, and we may not be able to renew such leases on commercially reasonable terms or at all. In addition, on certain portions of our acreage, third-party leases become immediately effective if our leases expire. | |
Pursuant to the Condor operating agreement, PEDCO is required to fund its 20% pro rata share of all Condor operations, commitments and expenses. Condor plans to drill 2 gross wells in the Niobrara Asset at an estimated cost of $7.6 million in 2014, of which PEDCO will be required to fund its 20% interest in Condor, or $1.52 million. | |
Legal Matters | |
The Company is not aware of any pending or threatened legal proceedings. The foregoing is also true with respect to each officer, director and control shareholder as well as any entity owned by any officer, director and control shareholder, over the last five years. | |
As part of its regular operations, the Company may become party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its’ commercial operations, products, employees and other matters. Although the Company can give no assurance about the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have on the Company, except as described above, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Company’s financial condition or results of operations. | |
Asia Sixth Acquisition | |
As discussed in Note 19, in September 2013 the Company entered into a series of transactions and agreements with Asia Sixth to acquire certain oil and gas production rights in Kazakhstan. The SSA provides for, among other things, based on how producing wells perform, at closing, the Company shall owe to Asia Sixth a final closing payment equal to an additional: (i) $20 million if the daily average volume of oil produced by Aral over a specified 30 day period (the “Target Volume”) equals or exceeds 1,500 barrels of oil per day (“BOPD”); (ii) $15 million if the Target Volume equals or exceeds 1,000 BOPD but is less than 1,500 BOPD; or (iii) $0 due if the Target Volume comes in less than 1,000 BOPD. Pursuant to the Asia Sixth Agreement, RJ Corp. is obligated to pay 50% of any final closing payment due to Asia Sixth. | |
13_PREFERRED_STOCK
13. PREFERRED STOCK | 12 Months Ended | |
Dec. 31, 2013 | ||
Notes to Financial Statements | ' | |
PREFERRED STOCK | ' | |
Series A Convertible Preferred Stock Designations | ||
At December 31, 2013, the Company was authorized to issue 100,000,000 shares of its Series A Preferred Stock with a par value of $0.001 per share. | ||
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 year ended December 31, 2012, activity in the Company’s preferred stock was as follows: | ||
● | In 2012, the Company issued 3,684,448 shares of New Series A Preferred Stock to investors for gross cash proceeds of $8,015,071. Offering costs were $246,423. | |
● | In February 2012, the Company issued 76,667 shares of New Series A Preferred Stock at a value of $172,500 to South Texas Reservoir Alliance LLC. (“STXRA”). A liability was accrued as of December 31, 2011 for this issuance, which issuance was made in full satisfaction of certain obligations to STXRA associated with the Niobrara Asset purchase. | |
● | In March 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. | |
● | In July 2012, the Company issued 122,812 shares of its New Series A Preferred Stock valued at $276,326 in exchange for a subscription receivable from Condor in connection with the acquisition of additional interests by Condor in the Niobrara formation of Weld and Morgan Counties, Colorado. | |
● | In September 2012, the Company issued 93,250 shares of its New Series A Preferred Stock valued at $559,498 for settlement of a payable due to Esenjay. | |
● | In November 2012, the Company issued 44,445 shares of its New Series A Preferred Stock to Esenjay pursuant to terms of a Modification Agreement wherein the Company extended the due date of a $1 million payment until February 18, 2013. These shares were recorded as additional interest expense of $280,001 based on the grant date fair value. | |
● | In October 2012, 9,000 shares of the Company’s New Series A Preferred Stock were converted by an investor into shares of the Company’s common stock. | |
During the year ended December 31, 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. | |
At December 31, 2013, there were -0- shares of the Company’s Series A preferred stock outstanding. |
14_COMMON_STOCK
14. COMMON STOCK | 12 Months Ended | |
Dec. 31, 2013 | ||
Notes to Financial Statements | ' | |
14. COMMON STOCK | ' | |
At December 31, 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 Company recorded stock-based compensation expense of $65,589 in 2012. The shares were subject to forfeiture in the event the recipient was no longer an officer to the Company, which risk of forfeiture lapsed 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 Company's equity incentive plan adopted in February 2012. At December 31, 2013, none of these 233,334 shares were subject to forfeiture. | ||
During the year ended December 31, 2012, the Company issued shares of common stock as follows: | ||
● | In February 2012, the Company granted to five of its consultants and employees a total of 551,667 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 were subject to forfeiture in the event the recipient was no longer an employee, officer, director or consultant to the Company, which risk of forfeiture lapsed 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 Company’s equity incentive plan adopted in February 2012. At December 31, 2012, 50% of these 551,667 shares were subject to forfeiture, and at December 31, 2013, none of these shares were subject to forfeiture. | |
● | In September 2012, as a result of the 1:112 Reverse Split, 474,291 shares of common stock were issued to shareholders of Blast. (See Note 4). | |
● | In October 2012, 71,596 shares of common stock were issued in connection with the Blast merger in settlement of outstanding debt of the Company of $487,218. (See Note 4). | |
● | In December 2012, the Company granted 13,334 shares of its restricted common stock with a grant date fair value of $80,000 to an independent contractor for services proved pursuant to our 2012 Equity Incentive Plan which shares were issued in January 2013. | |
● | In 2012, 457,576 shares of common stock were issued to Centurion pursuant to conversion of debt in the amount of $1,029,545. (See Note 12). | |
● | In June 2012, non-qualified stock options previously granted to South Texas Reservoir Alliance LLC (“STXRA”), were exercised at the $0.24 exercise price per share and STXRA paid $4,800 for the issuance of 20,000 shares of common stock. | |
● | In 2012, 161,086 shares of common stock were issued to employees and consultants in connection with the cashless exercise of common stock options. | |
● | In 2012, 37,529 shares of common stock were issued to an investor in connection with the cashless exercise of common stock warrants. | |
● | In October 2012, 9,000 shares of the Company’s New Series A Preferred Stock were converted by an investor into 9,000 shares of the Company’s Common Stock. | |
During 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 6,281,905 shares of common stock on a 1-for-1 conversion of all the Company’s 6,281,905 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 issued an aggregate of 27,804 shares of common stock 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 certain wells operated by Condor. These shares were valued at $116,499. 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 issued to Esenjay by the Company on Condor’s behalf. This amount was received during 2013. | |
● | On July 11, 2013, the Company issued to STXRA 33,815 shares of common stock at a fair value of $109,899 for services in connection with the acquisition of properties in the Mississippian formation. | |
● | On August 9, 2013, the Company granted an aggregate of 1,165,000 shares of its restricted common stock with an aggregate fair value of $4,368,750 to certain employees of the Company pursuant to the Company’s 2012 Equity Incentive Plan and in connection with the Company’s year 2012 annual equity incentive compensation review process. 40% of the shares vested nine months from the date of grant, 15% vest eighteen months from the date of grant, 15% vest two years from the date of grant, 15% vest two and one-half years from the date of grant and the final 15% vest three years from the date of grant, all contingent upon the recipient’s continued service with the Company. On this same date, the Company also granted an aggregate of 25,750 shares of its restricted common stock with an aggregate fair value of $96,563 to certain employees of, and consultants to, the Company pursuant to the Company’s 2012 Equity Incentive Plan and in connection with the Company’s year 2012 annual equity incentive compensation review process. The shares fully vested on the six month anniversary of the grant date, all contingent upon the recipient’s continued service with the Company. | |
● | On August 12, 2013, the Company completed the closing of a private placement (the “Private Placement”) pursuant to which it sold (a) 7,333,334 shares of its common stock at a price of $3.00 per share, which included rights to the following warrants (b) three-year warrants exercisable on a cash basis only for (i) an aggregate of 733,334 shares of common stock at $3.75 per share, (ii) an aggregate of 733,334 shares of common stock at $4.50 per share, and (iii) an aggregate of 733,334 shares of common stock at $5.25 per share, to two investors for aggregate proceeds to the Company in connection with such subscription of $22 million, $20 million of which securities were acquired by Yao Hang Finance (Hong Kong) Limited (the “Lead Investor”), the lead investor in the Private Placement, and $2 million of which securities were acquired by an outside investor (the “Outside Investor”). The Lead Investor paid $10 million in cash at the closing, and entered into a Common Stock and Warrant Subscription Agreement (the “Subscription Agreement”), First Amendment to Common Stock and Warrant Subscription Agreement (the “Amendment”), and full-recourse promissory note (the “Note”), which Amendment and Note require that it pay the balance of $10 million in cash due no later than December 1, 2013, with 3,333,333 of the shares of common stock issued to the Lead Investor in the Private Placement (the “Escrowed Shares”), as well as warrants exercisable for (i) an aggregate of 333,333 shares of Common Stock at $3.75 per share, (ii) an aggregate of 333,333 shares of common stock at $4.50 per share, and (iii) an aggregate of 333,333 shares of common stock at $5.25 per share (collectively, the “Escrowed Warrants”), being held in escrow by the Company pending the Lead Investor’s payment in full of the $10 million due under the Note. The Outside Investor also entered into a Subscription Agreement, Amendment and Note, which Amendment and Note require that it pay the $2 million purchase price for the common stock and warrants no later than September 11, 2013, with all shares and warrants issued to the Outside Investor in the Private Placement being held in escrow by the Company pending the Outside Investor’s payment in full of the $2 million due under the Note. On September 30, 2013, the Company received cash payment in full from the Outside Investor that was due under the $2 million promissory note, and the Outside Investor’s shares and warrants were released from escrow. The Lead Investor failed to pay the $10 million balance due under the Note by December 1, 2013, On December 1, 2013, the Company granted a verbal extension to the Lead Investor pending further discussions regarding the investment. Following discussions with the Lead Investor, the Lead Investor elected to forego making further investment. Accordingly, on March 7, 2014, the Company notified the Lead Investor that, effective immediately, the Escrowed Shares and Escrowed Warrants were rescinded as permitted pursuant to the terms of the Note, and the Note was cancelled and forgiven, with no further action required by the investor (the “Cancellation”). The stock subscription receivable related to 3,333,333 shares of common stock and 999,999 warrants for shares of common stock in the amount of $10 million was extinguished as of March 7, 2014. The rescission of the shares and warrants will be reflected in the Company’s financial statements in the first quarter of 2014. | |
● | On August 20, 2013, the Company issued 4,900 shares of common stock for cash proceeds of $11,025 to a former director of Blast Energy Services, Inc. in connection with the exercise of 4,900 warrants. | |
● | On September 10, 2013, the Company granted an aggregate of 26,668 shares of its restricted common stock with an aggregate fair value of $120,006 to the two new independent directors of the Company pursuant to the Company’s 2012 Equity Incentive Plan. 100% of the shares vest on the one year anniversary date of grant, contingent upon the recipient’s continued service with the Company. | |
● | On October 31, 2013, the Company issued 12,768 shares of common stock to an employee in connection with the exercise of 12,768 options on a cashless basis. | |
● | On November 6, 2013, the Company granted an aggregate of 305,000 shares of its restricted common stock with an aggregate fair value of $924,150, for placement agent services. 100% of the shares vested on January 28, 2014. | |
● | On December 16, 2013, the Company issued 3,250,000 shares of common stock in connection with its public offering and received $6,281,767 in net proceeds after deducting offering costs. | |
● | On December 17, 2013, the Company issued 22,148 shares of common stock to an employee in connection with the exercise of 22,148 options on a cashless basis. | |
During the year ended December 31, 2013, the Company received $276,326 from Condor in payment of the stock subscription receivable for 122,812 shares of the Company's New Series A Preferred Stock issued in July 2012. | ||
15_STOCK_OPTIONS_AND_WARRANTS
15. STOCK OPTIONS AND WARRANTS | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
Equity [Abstract] | ' | ||||||||||||||
STOCK OPTIONS AND WARRANTS | ' | ||||||||||||||
Blast 2003 Stock Option Plan and 2009 Stock Incentive Plan | |||||||||||||||
As of December 31, 2012, 10,205 shares of common stock granted under Blast’s 2003 Stock Option Plan and 2009 Stock Incentive Plan were outstanding and exercisable, and as of December 31, 2013 and 2012, 3,424 shares of common stock granted under these plans remain outstanding and exercisable. No options were issued under these plans in 2012 or 2013. | |||||||||||||||
2012 Incentive Plan | |||||||||||||||
On July 27, 2012, the shareholders of the Company approved the 2012 Equity Incentive Plan (the “2012 Incentive Plan”), which was previously approved by the Board of Directors on June 27, 2012, and authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, performance shares and other securities as described in greater detail in the 2012 Incentive Plan, to the Company’s employees, officers, directors and consultants. A total of 2,000,000 shares of Common Stock are eligible to be issued under the 2012 Incentive Plan. | |||||||||||||||
PEDCO 2012 Equity Incentive Plan | |||||||||||||||
As a result of the Merger, the Company assumed the PEDCO 2012 Equity Incentive Plan (the “PEDCO Incentive Plan”), which was adopted by PEDCO on February 9, 2012. The PEDCO Incentive Plan authorized PEDCO to issue an aggregate of 1,000,000 shares of common stock in the form of restricted shares, incentive stock options, non-qualified stock options, share appreciation rights, performance share, and performance unit under the PEDCO Incentive Plan. As of December 31, 2013, options to purchase 1,221,667 shares of PEDCO common stock and 551,667 shares of PEDCO restricted common stock had been granted under this plan (all of which were granted by PEDCO prior to the closing of the Merger, with such grants being assumed by the Company and remaining subject to the PEDCO Incentive Plan following the consummation of the Merger). The Company does not plan to grant any additional awards under the PEDCO Incentive Plan post-Merger. | |||||||||||||||
Options | |||||||||||||||
In 2012, options to purchase an aggregate of 88,333 shares of common stock were granted to five consultants and employees at an exercise price of $0.30 per share. The options have terms of 10 years and fully vested in February 2014. 50% of the shares subject to the options vested six months from the date of grant, 20% vested one year from the date of grant, 20% vested eighteen months from the date of grant, and the final 10% vested two years from the date of grant, all contingent upon the recipient’s continued service with the Company. The fair value of the options on the date of grant using the Black-Scholes model was $20,670. | |||||||||||||||
In 2012, options to purchase an aggregate of 1,133,334 shares of common stock were granted to members of Company management and employees at an exercise price of $0.51 per share. The options have terms of 10 years and fully vest in June 2014. 50% of the shares subject to the options vested six months from the date of grant, 20% vested one year from the date of grant, 20% vested eighteen months from the date of grant, and the final 10% vest two years from the date of grant, all contingent upon the recipient’s continued service with the Company. The fair value of the options on the date of grant using the Black-Scholes model was $272,000. | |||||||||||||||
On August 9, 2013, the Company granted options to purchase an aggregate of 104,500 shares of common stock to four consultants and employees at an exercise price of $3.75 per share, pursuant to the Company’s 2012 Equity Incentive Plan and in connection with the Company’s 2012 annual equity incentive compensation review process. The options have terms of five years and fully vest in August 2016. With respect to options to purchase an aggregate of 64,500 shares, 40% of the shares subject to the options vested six months from the date of grant, 15% vest eighteen months from the date of grant, 15% vest two years from the date of grant, 15% vest two and one-half years from the date of grant and the final 15% vest three years from the date of grant, all contingent upon the recipient’s continued service with the Company. With respect to options to purchase an aggregate of 40,000 shares, 25% of the shares subject to the options vested six months from the date of grant, 15% vest twelve months from the date of grant, 15% vest eighteen months from the date of grant, 15% vest two years from the date of grant, 15% vest two and one-half years from the date of grant and the final 15% vest three years from the date of grant, all contingent upon the recipient’s continued service with the Company. The aggregate fair value of the options on the date of grant, using the Black-Scholes model, was $228,670. Variables used in the Black-Scholes option-pricing model for the options issued included: (1) a discount rate of 0.61%, (2) expected term of 3.5 years, (3) expected volatility of 85%, and (4) zero expected dividends. | |||||||||||||||
During the year ended December 31, 2013, the Company recognized option stock-based compensation expense of $564,366. The remaining amount of unamortized stock options expense at December 31, 2013 was $145,960. The Black-Scholes option-pricing model was used to determine fair value. Variables used in the Black-Scholes option-pricing model for the options issued included: (1) a discount rate range of 0.27% to 1.36%, (2) expected term of 2 to 3.5 years, (3) expected volatility range of 85% to 173%, and (4) zero expected dividends. | |||||||||||||||
The intrinsic value of outstanding and exercisable options at December 31, 2013 was $2,178,812 and $1,983,579, respectively. | |||||||||||||||
Option activity during the year ended December 31, 2013 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (years) | |||||||||||||
Outstanding at January 1, 2013 | 1,218,206 | $ | 0.92 | 9.3 | |||||||||||
Granted | 104,500 | 3.75 | |||||||||||||
Rescission of granted options | 127,800 | 0.48 | |||||||||||||
Exercised | (39,000 | ) | 0.28 | ||||||||||||
Forfeited and cancelled | (6,782 | ) | 21.99 | ||||||||||||
Outstanding at December 31, 2013 | 1,404,724 | $ | 0.8 | 8.09 | |||||||||||
Exercisable at December 31, 2013 | 1,182,309 | $ | 0.57 | 8.36 | |||||||||||
Option activity during the year ended December 31, 2012 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (years) | |||||||||||||
Outstanding at January 1, 2012 | 176,667 | $ | 0.24 | 9.75 | |||||||||||
Granted under Blast merger | 12,973 | 125.15 | |||||||||||||
Granted | 1,221,667 | 0.49 | |||||||||||||
Exercised | (190,333 | ) | 0.46 | ||||||||||||
Forfeited and cancelled | (2,768 | ) | 381.63 | ||||||||||||
Outstanding at December 31, 2012 | 1,218,206 | $ | 0.92 | 9.3 | |||||||||||
Exercisable at December 31, 2012 | 561,372 | $ | 1.44 | 9.2 | |||||||||||
Summary of options outstanding and exercisable as of December 31, 2013: | |||||||||||||||
Exercise Price | Weighted Average | Options Outstanding | Options Exercisable | ||||||||||||
Remaining Life (years) | |||||||||||||||
$ | 0.24 | 0.81 | 146,667 | 146,667 | |||||||||||
0.3 | 0.34 | 59,335 | 50,500 | ||||||||||||
0.51 | 6.58 | 1,090,800 | 981,720 | ||||||||||||
3.75 | 0.34 | 104,500 | - | ||||||||||||
30.24 | 0.02 | 2,976 | 2,976 | ||||||||||||
67.2 | - | 446 | 446 | ||||||||||||
$ | 0.24 to $67.20 | 8.09 | 1,404,724 | 1,182,309 | |||||||||||
Summary of options outstanding and exercisable as of December 31, 2012: | |||||||||||||||
Exercise Price | Weighted Average | Options Outstanding | Options Exercisable | ||||||||||||
Remaining Life (years) | |||||||||||||||
$ | 0.24 | 1.08 | 149,667 | 103,667 | |||||||||||
0.3 | 0.6 | 80,000 | 35,833 | ||||||||||||
0.51 | 7.6 | 978,333 | 411,666 | ||||||||||||
30.24 | 0.02 | 5,953 | 5,953 | ||||||||||||
33.6 | - | 2,247 | 2,247 | ||||||||||||
67.2 | - | 893 | 893 | ||||||||||||
127.68 | - | 36 | 36 | ||||||||||||
134.4 | - | 298 | 298 | ||||||||||||
204.96 | - | 36 | 36 | ||||||||||||
268.8 | - | 743 | 743 | ||||||||||||
$ | 0.24 to $268.80 | 9.3 | 1,218,206 | 561,372 | |||||||||||
Warrants | |||||||||||||||
In 2012, in connection with the Series A Preferred Stock issuances, the Company issued warrants to its placement agent and an employee to purchase a total of 20,000 shares of Series A Preferred Stock valued at $1.26 per share on the grant date. These warrants have an exercise price of $2.25 per share and expire in April 2015. | |||||||||||||||
In 2012, warrants to purchase an aggregate of 33,334 shares of common stock were granted to an advisor at an exercise price of $0.30 per share. The warrants have a term of 10 years and were fully vested on the date of grant. The Company recorded $8,000 of stock compensation expense on the date of grant. | |||||||||||||||
In 2012, the Company issued warrants to an advisor to purchase a total of 2,167 shares of its Series A Preferred Stock valued at $1.26 per share on the grant date. These warrants have an exercise price of $2.25 per share and expire in May 2015. The Company recorded $2,714 of stock compensation expense on the date of grant. | |||||||||||||||
In 2012, as part of the sale of 50% of the ownership interests in White Hawk to an affiliate of MIE Holdings, the Company granted a two-year warrant to the affiliate of MIE Holdings exercisable for 166,667 shares of Company common stock at $3.75 per share valued at $1,586, exercisable solely on a cash basis, and granted a two-year warrant to the affiliate of MIE Holdings exercisable for 166,667 shares of Company common stock at $4.50 per share valued at $1,000, exercisable solely on a cash basis. The Company recorded $2,586 of stock-based compensation expense for the fair value of the warrants issued on the date of grant. These warrants expire in May 2014. | |||||||||||||||
In 2012, the Company issued warrants to seven consultants who provided placement agent services to purchase a total of 47,806 shares of its Series A Preferred Stock valued at $1.26 on the grant date. These warrants have an exercise price of $2.25 per share and expire in July 2015. | |||||||||||||||
In 2012, the Company issued warrants to three consultants who provided services for public relations, marketing, and Merger integration support to purchase a total of 41,667 shares of its Common Stock valued at $1.25 on the grant date. These warrants have an exercise price of $2.25 per share and expire in July 2015. The Company recorded $52,156 of stock-based compensation expense for the fair value of the warrants issued on the date of grant. | |||||||||||||||
In 2012, the Company acquired 68,736 warrants as part of the merger with Blast. | |||||||||||||||
In 2012, the principals of Trident Partners Ltd. (“Trident principals”) were issued an aggregate of 1,670 shares of the Company’s common stock upon the cashless net exercise of warrants exercisable for a total of 3,795 shares of the Company’s common stock that were originally issued to the Trident principals on June 3, 2011 and December 22, 2011 with an exercise price of $3.36 per share. | |||||||||||||||
In March 2013, the Company issued warrants to purchase 76,198 shares of the Company’s common stock to investors in conjunction with its Bridge Financing. Fair value of $243,771 was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for the warrants issued included: (1) discount rate of 0.60%; (2) expected term of 4 years; (3) expected volatility of 85%; and (4) zero expected dividends. Fair value of $256,857 was recorded as a debt discount which was calculated using Monte Carlo simulation. | |||||||||||||||
Somerley Limited (“Somerley”) acted as the Company’s placement agent with respect to a portion of the Bridge Financing sold to non-U.S. investors. As compensation, in March 2013, Somerley received total cash fees of $40,000 and Bridge Warrants to purchase a total of up to 9,524 shares of the Company’s common stock at an exercise price of $5.25 per share valued at $31,176 using the Black-Scholes option pricing model. | |||||||||||||||
On July 15, 2013, the Company issued a five-year warrant exercisable for 240,000 shares of the Company’s common stock on a cashless basis to an investor relations consultant as partial consideration for certain investor relations services to be provided to the Company (the “IR Warrant”). The fair value calculated using the Black-Scholes option-pricing model on the date of issuance was $284,886. The IR Warrant has an exercise price per share of $5.00, and vested with respect to 50% of the shares issuable thereunder upon the IR Warrant issuance date, and 50% on February 1, 2014, subject to continued engagement by the Company of the investor relations consultant on such date. Variables used in the Black-Scholes option-pricing model for the warrants issued included: (1) discount rate of 0.66%; (2) expected term of 2.5 years; (3) expected volatility of 85%; and (4) zero expected dividends. On October 9, 2013, the investor relations consultant notified the Company that it was immediately winding-down its operations and was terminating all investor relations engagements, including with the Company. Accordingly, the Company cancelled the IR Warrant in full on October 25, 2013 due to non-performance by the consultant. No expense was recorded for these warrants. | |||||||||||||||
In connection with the August 2013 Private Placement, the Company issued (after consideration of the rescission discussed in Note 19) warrants exercisable for (i) an aggregate of 333,333 shares of Common Stock at $3.75 per share, (ii) an aggregate of 333,333 shares of Common Stock at $4.50 per share, and (iii) an aggregate of 333,333 shares of Common Stock at $5.25 per share issued to the Lead Investor in the Private Placement. The fair value of the warrants on the date of grant was $1,309,269. | |||||||||||||||
On December 16, 2013, the Company issued 166,684 warrants in connection with the amendment and extension of repayment of certain bridge notes, with a fair value of $181,475. Variables used in the Black-Scholes option-pricing model for the warrants issued included: (1) discount rate of 1.55%; (2) expected term of 2 years; (3) expected volatility of 86%; and (4) zero expected dividends. | |||||||||||||||
During the year ended December 31, 2013, the Company recognized warrant stock based compensation expense of $0. | |||||||||||||||
The intrinsic value of outstanding as well as exercisable warrants at December 31, 2013 and 2012 was $125,335 and $1,883,479. | |||||||||||||||
Warrant activity during the year ended December 31, 2013 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (# years) | |||||||||||||
Outstanding at January 1, 2012 | 633,631 | $ | 18.25 | 2.43 | |||||||||||
Granted | 2,452,408 | 4.38 | |||||||||||||
Exercised | (4,900 | ) | 2.25 | ||||||||||||
Forfeited and cancelled | (27,769 | ) | |||||||||||||
Outstanding at December 31, 2013 | 3,053,370 | $ | 4.12 | 2.49 | |||||||||||
Exercisable at December 31, 2013 | 3,053,370 | $ | 4.12 | 2.49 | |||||||||||
Warrant activity during the year ended December 31, 2012 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (# years) | |||||||||||||
Outstanding at January 1, 2012 | 193,334 | $ | 1.89 | 4.04 | |||||||||||
Granted under Blast merger | 68,736 | 141.81 | |||||||||||||
Granted | 479,195 | 3.42 | |||||||||||||
Exercised | (106,890 | ) | 1.56 | ||||||||||||
Forfeited and cancelled | (744 | ) | 33.6 | ||||||||||||
Outstanding at December 31, 2012 | 633,631 | $ | 18.25 | 2.43 | |||||||||||
Exercisable at December 31, 2012 | 633,631 | $ | 18.25 | 2.43 | |||||||||||
Summary of warrants outstanding and exercisable as of December 31, 2013 was as follows: | |||||||||||||||
Exercise Price | Weighted Average Remaining Life (years) | Warrants Outstanding | Warrants Exercisable | ||||||||||||
$ | 0.24 | 0.08 | 33,334 | 33,334 | |||||||||||
0.3 | 0.09 | 33,333 | 33,333 | ||||||||||||
2.25 | 0.08 | 200,961 | 200,961 | ||||||||||||
2.34 | 0.22 | 166,684 | 166,684 | ||||||||||||
3.75 | 0.65 | 900,001 | 900,001 | ||||||||||||
4.5 | 0.65 | 900,001 | 900,001 | ||||||||||||
5.25 | 0.72 | 819,056 | 819,056 | ||||||||||||
$ | 0.24 to $5.25 | 2.49 | 3,053,370 | 3,053,370 | |||||||||||
Summary of warrants outstanding and exercisable as of December 31, 2012 was as follows: done | |||||||||||||||
Exercise Price | Weighted Average Remaining Life (years) | Warrants Outstanding | Warrants Exercisable | ||||||||||||
$ | 0.08 | 0.46 | 33,334 | 33,334 | |||||||||||
0.1 | 0.49 | 33,334 | 33,334 | ||||||||||||
0.75 | 0.72 | 205,862 | 205,862 | ||||||||||||
1.12 | 0 | 4,882 | 4,882 | ||||||||||||
1.25 | 0.37 | 166,667 | 166,667 | ||||||||||||
1.5 | 0.37 | 166,667 | 166,667 | ||||||||||||
22.4 | 0 | 2,529 | 2,529 | ||||||||||||
112 | 0 | 2,232 | 2,232 | ||||||||||||
161.28 | 0.02 | 18,124 | 18,124 | ||||||||||||
$ | 0.08 to $161.28 | 2.43 | 633,631 | 633,631 | |||||||||||
16_RELATED_PARTY_TRANSACTIONS
16. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
On February 14, 2013, PEDCO entered into a Secured Subordinated Promissory Note, as amended on March 25, 2013 and July 9, 2013 (the “Note”) with MIEJ, with a maximum of $6.5 million available under the Note, with repaid amounts not being permitted to be re-borrowed. The Note converted $2.17 million previously advanced by MIEJ to PEDCO to fund operations in the Niobrara Asset, as well as an additional $2 million loaned by MIEJ to PEDCO under the Note on February 14, 2013 and $2 million loaned by MIEJ to PEDCO under the Note on March 25, 2013, for a total principal amount outstanding under the Note of $6.17 million as of December 31, 2013. There is currently approximately $330,000 available for future borrowing by PEDCO under the Note. Further, the Company owes $585,777 in accrued interest at December 31, 2013 under the Note. | |
In May 2012, the Company merged its wholly-owned subsidiary, Excellong E&P-2, Inc., into White Hawk and then sold 50% of its ownership interests in White Hawk to MIEJ and issued certain warrants. See Note 5. | |
The Company loaned White Hawk funds for operating expenses and drilling and completion costs for four Eagle Ford wells, pursuant to a promissory note on June 4, 2012, which note permits multiple loans to be made as separate “advances”, with no stated maximum limit of loan principal. The note receivable bears interest at a rate per annum equal to the one (1) month LIBOR rate for U.S. dollar deposits plus four (4.0) percentage points. Principal and interest of each loan is due thirty-six (36) months from the date each advance is made under the note, with the first repayment being due June 4, 2015. As of December 31, 2013, the balance of the note receivable is $1,252,393. As previously discussed, as of December 31, 2013, White Hawk became a wholly-owned subsidiary, and this amount was eliminated in consolidation. | |
The Company loaned Condor funds for operations pursuant to a promissory note entered into on February 14, 2013, with an effective date of November 1, 2012, which note permits multiple loans to be made thereunder up to $8,000,000 as separate “advances”. The note receivable bears interest at a rate per annum equal to the one (1) month LIBOR rate for U.S. dollar deposits plus four (4.0) percentage points. Principal and interest are due thirty-six (36) months from the date each advance is made under the note, with the first repayment being due September 24, 2015. As of December 31, 2013, the balance of the note receivable is $5,005,108 plus accrued interest of $188,469 due from Condor. The carrying balance of the note receivable and accrued interest was reduced by $5,193,577 as the Company’s share of losses from Condor for the year ended December 31, 2013 of $5,626,567 were more than the Company’s residual value in Condor of $160,353 in the investment account. In accordance with ASC 323-10-35, the excess loss from Condor was used to reduce the notes receivable balance. | |
On November 1, 2012, and pursuant to the terms of the Inter-Company Agreement, Condor and the Company amended and restated the PEDCO Note in full to capitalize interest accrued under the PEDCO Note to November 1, 2012. As a result $1,224 in accrued interest was capitalized as additional principal. During the year ended December 31, 2012, the Company advanced $2,434,442 in cash and 122,812 shares of PEDEVCO’s Series A Preferred Stock valued at $276,326. As of December 31, 2012, Condor had $2,711,992 and $16,963 in loans payable and accrued interest, respectively, to the Company. During the year ended December 31, 2013, the Company advanced $3,001,875 in cash and 27,804 shares of PEDEVCO’s common stock valued at $116,499. Condor made repayments of $393,642 to the Company which were used to settle the stock subscription receivable of $392,825 and accrued interest of $871. | |
Accruals for drilling costs due to Condor as a working interest owner and revenue receivable due from Condor as a working interest owner represent capital expenditures, lease operating expenses and revenues allocable to the Company for its working interests and net revenue interests in the Niobrara asset. | |
The Company has an agreement to provide management services to Condor for which Condor owes $75,131 and $81,124 at December 31, 2013 and 2012, respectively. Total fees billed to Condor were $667,054 and $363,102 in 2013 and 2012, respectively. | |
On March 22, 2013, the Company closed a private placement of Bridge Notes. Frank C. Ingriselli, the Company’s President, Chief Executive Officer, and member of the Company’s Board of Directors, participated in the Bridge Financing, purchasing Bridge Notes of $1 million and receiving Bridge Warrants exercisable for 19,048 shares of the Company’s common stock, and Clark R. Moore, the Company’s Executive Vice President and General Counsel, purchased Bridge Notes of $50,000 and received Bridge Warrants exercisable for 953 shares of the Company’s common stock, respectively. See Note 10. | |
Frank C. Ingriselli, the Company’s President, Chief Executive Officer, and member of the Company’s Board of Directors, agreed to defer $500,000 of the original $1.0 million principal amount outstanding under his Bridge Note, and on the Payment Date, the Company paid $73,699 in accrued interest and $100,000 in PIK amounts due, and repaid 50% of his outstanding principal amount of $500,000. Mr. Ingriselli received a New Warrant exercisable for 38,096 shares of the Company’s common stock valued at $41,477 on the grant date. Clark R. Moore, the Company’s Executive Vice President and General Counsel, agreed to defer $25,000 of the original $50,000 principal amount outstanding under his Bridge Note, and on the Payment Date, the Company paid $3,685 in accrued interest and $5,000 in PIK amounts due, and repaid 50% of his outstanding principal amount of $25,000. Mr. Moore received a New Warrant exercisable for 1,906 shares of the Company’s common stock valued at $2,075 on the grant date. | |
Mr. Ingriselli and Mr. Moore transferred their Bridge Notes to non-affiliates of the Company prior to the further amendment of such Bridge Notes in March 2014, and as such, such officers no longer hold any Bridge Notes or rights. See Note 10. | |
17_INCOME_TAXES
17. INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
INCOME TAXES | ' | ||||||||
Due to the Company’s net loss, there was no provision for income taxes for the years ended December 31, 2013 and 2012. | |||||||||
The difference between the income tax expense of zero shown in the statement of operations and pre-tax book net loss times the federal statutory rate of 34% is principally due to the change in the valuation allowance. | |||||||||
Deferred income taxes assets for years ended December 31, 2013 and 2012 are as follows: | |||||||||
Deferred Tax Assets (Liabilities) | Year ended | Year ended | |||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Difference in depreciation, depletion, and capitalization methods – oil and natural gas properties | $ | 562,342 | $ | 18,845 | |||||
Net operating losses | 4,131,374 | 1,761,066 | |||||||
Impairment – oil and natural gas properties | (1,122,953 | ) | (61,289 | ) | |||||
Other | (33,885 | ) | (43,809 | ) | |||||
Total noncurrent deferred tax asset | 3,536,878 | 1,674,813 | |||||||
Less valuation allowance | (3,536,878 | ) | (1,674,813 | ) | |||||
Total deferred tax assets | $ | - | $ | - | |||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. | |||||||||
Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, management has applied a full valuation allowance against its net deferred tax assets at December 31, 2013. The net change in the total valuation allowance from December 31, 2012 to December 31, 2013, was an increase of $1,862,065. | |||||||||
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2013, the Company did not have any significant uncertain tax positions or unrecognized tax benefits. The Company did not have associated accrued interest or penalties, nor was any interest expense or penalties recognized for the years ended December 31, 2013 and 2012. | |||||||||
As of December 31, 2013 the Company has federal net operating loss carryforwards of approximately $8,229,866 for federal and state tax purposes, respectively. If not utilized, these losses will expire beginning in 2031 for both federal and state purposes. | |||||||||
Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code (the “Code”), as amended, as well as similar state provisions. In general, an "ownership change" as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain shareholders or public groups. | |||||||||
The Company currently has tax returns open for examination by the Internal Revenue Service for all years since 2005. |
18_PRIOR_YEAR_RESTATEMENTS
18. PRIOR YEAR RESTATEMENTS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accounting Changes and Error Corrections [Abstract] | ' | ||||||||
PRIOR YEAR RESTATEMENTS | ' | ||||||||
2012 Restatements | |||||||||
On April 11, 2013, the consolidated financial statements, for the period from January 1, 2012 through December 31, 2012, have been restated to properly classify the Company’s issuance of 122,812 shares of Series A preferred stock to a related party as stock subscriptions receivable rather than a note receivable. | |||||||||
In addition, the consolidated financial statements have been restated to properly present on the balance sheet and the statement of shareholders’ equity the classification of Series A Preferred Shares issued and outstanding; the par value and additional paid in capital for the 555,556 shares of Series A preferred stock presented outside of shareholders’ equity as the redemption of such shares is outside the control of the issuer. | |||||||||
The impact on the previously reported balance sheet as of December 31, 2012 is as follows: | |||||||||
As Reported | As Restated | ||||||||
Notes receivable – related parties | $ | 3,062,390 | $ | 2,786,064 | |||||
Total assets | $ | 11,423,050 | $ | 11,146,724 | |||||
Series A convertible preferred stock | $ | 20,371 | $ | 18,704 | |||||
Additional paid in capital | $ | 18,138,916 | $ | 18,140,583 | |||||
Stock subscriptions receivable | $ | - | $ | (276,326 | ) | ||||
Total shareholder’s equity | $ | (5,404,150 | ) | $ | (5,127,824 | ) | |||
Total liabilities and shareholders' equity | $ | 11,423,050 | $ | 11,146,724 |
19_SUBSEQUENT_EVENTS
19. SUBSEQUENT EVENTS | 12 Months Ended | |
Dec. 31, 2013 | ||
Subsequent Events [Abstract] | ' | |
SUBSEQUENT EVENTS | ' | |
Purchase and Sale Agreement for White Hawk Properties | ||
On February 19, 2014, White Hawk entered into and closed a Purchase and Sales Agreement (the “Sale Agreement”) with Millennial PDP Fund IV, LP (“Millennial”), pursuant to which White Hawk sold its remaining interests in the Eagle Ford Shale formation to Millennial for net cash proceeds of $2,718,158 received on February 27, 2014. White Hawk will record an estimated loss on the sale of $515,314 in the first quarter of 2014. | ||
Sale of 3,438,500 Shares of Common Stock | ||
On March 7, 2014, the Company closed an underwritten offering for an aggregate of 3,438,500 shares of common stock at $2.15 per share. The Company has received gross proceeds of $7,392,775 before deducting underwriting discounts and offering expenses as a result of the offering. The Company expects to use the net proceeds of approximately $6,581,000 from the March 2014 Offering to fund drilling operations, for working capital and other general corporate purposes. | ||
Acquisition of Properties from Continental Resources, Inc. | ||
On January 21, 2014, Red Hawk entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Continental, pursuant to which the Company agreed to acquire Continental’s interests (the “Continental Acquisition”) in approximately 28,727 net acres of oil and gas properties and interests in 40 wells located in the Niobrara formation of the DJ Basin, Colorado, including approximately 2,200 net acres in the Wattenberg Area, for $30 million in cash (subject to customary post-closing adjustments). | ||
The Company paid $1.5 million of the purchase price as a deposit upon entering into the Purchase Agreement (the “Deposit”). The final purchase price after adjustments was $28,521,822, resulting in $27,031,822 due to Continental after applying the Deposit (the “Final Purchase Price”). In connection with the purchase, the Company also assumed an obligation of approximately $845,000 of accounts payable to royalty owners, mineral owners and other persons with an interest in production associated with the assets acquired. | ||
On March 7, 2014, the Company completed the Continental Acquisition and used a portion of funds from the initial closing of a $50 million financing facility with RJ Credit LLC etal. of which $34.5 million was borrowed initially to pay the Final Purchase Price to acquire Continental's properties (representing an adjusted total of 27,990 net acres at closing). As described below, the Note Purchase Agreement further provided that the Company convey 50% of the interests acquired from Continental to RJ Corp. as additional consideration for agreeing to make the initial loans and subsequent loans. | ||
Note Purchase Agreement and Sale of Secured Promissory Notes | ||
On March 7, 2014, the Company entered into a $50 million financing facility between the Company, BRe BCLIC Primary, BRe BCLIC Sub, BRe WNIC 2013 LTC Primary, BRe WNIC 2013 LTC Sub, and RJ Credit LLC (“RJC”), as investors (collectively, the “Investors”), and BAM Administrative Services LLC, as agent for the Investors (the “Agent”). Pursuant to the Note Purchase, the Company initially issued the Investors Secured Promissory Notes in the aggregate amount of $34.5 million (the “Initial Notes”) and provided for an additional $15.5 million available under the financing agreement to fund future drilling costs. The Initial Notes are due and payable on March 6, 2017 (the “Maturity Date”), and may be repaid in full without premium or penalty at any time. | ||
The Company received net proceeds of $27,473,095 on March 7, 2014 from the initial Note Purchase Agreement (the “Note Purchase”) after offering costs including an original issue discount of $1,725,000 (5% of the balance of the Initial Notes); and an underwriting fee of $3,450,000 (10% of the balance of the Initial Notes). The Company also reimbursed approximately $135,000 of the legal fees and expenses of the Investors’ counsel, and paid the Casimir Note Closing Fee of $1,716,905 to Casimir, the Company’s investment banker. Upon the closing of the Note Purchase, we also granted Casimir warrants to purchase up to 1,000,000 shares of our common stock at an exercise price of $2.50 per share (the closing sales price of our common stock on the date immediately prior to the closing date of the Note Purchase), which warrants have cashless exercise rights and a term of five years (the “Casimir Warrants”). The fair value of these warrants was $1,047,974 and will be recorded as a debt discount and amortized over the term of the financing facility. | ||
The financing agreement provides for additional loans (with substantially similar terms as the Initial Notes, the “Subsequent Notes”) from RJC, up to an additional $15.5 million in total or an aggregate of $50 million together with the Initial Notes. The Company is required to pay original issue discounts of 5% of the funds borrowed, underwriting fees of 10% of the funds borrowed, reimburse certain legal fees of RJC’s counsel, and pay applicable fees to Casimir representing 5% of any additional funds borrowed. Funds borrowed under any Subsequent Notes are only eligible to be used by the Company for approved authorization for expenditures (“AFEs”) issued for a well or wells to be drilled and completed on any properties acquired in connection with the Continental Acquisition or properties owned by the Company and located in Comanche, Harper, Barber and Kiowa Counties, Kansas (the “Mississippian Property”). The total aggregate amount of any Subsequent Notes cannot exceed $15.5 million and in the event the Company drills a dry hole, the Company is prohibited from using any proceeds from the issuance of any Subsequent Notes, without the consent of RJC. Additionally, pursuant to the Note Purchase, no proceeds the Company receives from the transfer, sale, assignment or farm-out of the Mississippian Property may be used to fulfill the Company’s obligations to fund its portion of drilling. | ||
The Notes bear interest at the rate of 15% per annum, payable monthly in arrears, on the first business day of each month beginning April 1, 2014 (in connection with the Initial Notes), provided that upon the occurrence of an event of default, the Notes bear interest at the lesser of 30% per annum and the maximum legal rate of interest allowable by law. The Company can prepay all or any portion of the principal amount of Notes, without premium or penalty. The Notes include standard and customary events of default. | ||
Additionally, the Company is required on the third business day of each month, commencing on April 1, 2014, to prepay the Notes in an amount equal to the lesser of (a) the outstanding principal amount of the Notes or (b) twenty-five percent (25%) of the aggregate of all net revenues actually received by the Company and its subsidiaries (other than net revenues received by Asia Sixth, unless and to the extent received by the Company in the United States) or for the immediately preceding calendar month (or such pro rata portion of the first month the payment is required). The Notes also provide that RJC is to be repaid (i) accrued interest, only after all of the other Investors are repaid any accrued interest due and (ii) principal, only after all of the other Investors are repaid the full amount of principal due under their Notes, and (iii) that any funding in connection with Subsequent Notes will be made solely by RJC. | ||
The amount outstanding under the Notes is secured by a first priority security interest in all of the Company’s and its subsidiaries, assets, property, real property, intellectual property, securities and proceeds therefrom, granted in favor of the Agent for the benefit of the Investors, pursuant to a Security Agreement and Patent Security Agreement, and described in greater detail therein. Additionally, the Agent, for the benefit of the Investors, was granted a mortgage and security interest in all of the Company’s and its subsidiaries real property as located in the state of Colorado (including those assets acquired pursuant to the Continental Acquisition (defined and described below under Item 2.01)) and the state of Texas pursuant to (i) Leasehold Deed of Trust, Fixture Filing, Assignment of Rents and Leases, and Security Agreements filed in Weld County and Morgan County, Colorado; and (ii) a Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production filed in Matagorda County, Texas (collectively, the “Mortgages”). Additionally, the Company’s obligations under the Notes, Note Purchase Agreement and related agreements were guaranteed by the Company’s direct and indirect subsidiaries, PEDCO, White Hawk Petroleum, LLC (“White Hawk”), Pacific Energy & Rare Earth Limited, Blackhawk Energy Limited, PEDCO MSL and Red Hawk pursuant to a Guaranty Agreement. | ||
As additional consideration for RJC providing the loan evidenced by its Initial Note and agreeing to provide the funding from the Subsequent Notes, on March 7, 2014, the Company entered into the following transactions in favor of RJC and its affiliate RJ Resources Corp. (“RJ Corp.”): | ||
● | Red Hawk Purchase - A Purchase and Sale Agreement between Pacific Energy Development Corp.’s (the Company’s wholly-owned subsidiary, “PEDCO”) wholly-owned subsidiary, Red Hawk Petroleum, LLC (“Red Hawk”) and RJ Corp. (the “Red Hawk Purchase”); the principal terms of which require the conveyance of 50% of the mineral interests and leases acquired in the Continental Acquisition to RJ Resources Corp. The agreement also provides that for three years from March 7, 2014, RJ Corp. does not have the right to propose or conduct any operations on the property acquired pursuant to the Red Hawk Purchase, unless (a) approved by Red Hawk, or (b) unless Red Hawk fails to execute the portion of the then current capital expenditure plan related to such applicable assets, provided that RJ Corp. may not (i) propose to drill more wells on such lands during the calendar year covered by such capital expenditure plan than are prescribed in the portion of such applicable capital expenditure plan and (ii) propose or conduct any operations on such lands during the following calendar year in excess of the operations budgeted for in the portion of such applicable capital expenditure plan. | |
● | Asia Sixth Purchase - The Asia Sixth Purchase Agreement between PEDCO and RJ Corp. (the “Asia Sixth Purchase”); the principal terms of which require the conveyance of 50% of the Company’s 51% interest in Asia Sixth and if any part of the $10 million deposit previously paid by the Company in connection with the Shares Subscription Agreement is returned to the Company, 50% of any such returned funds will be paid to RJ Corp. | |
● | Membership Purchase and Plan of Merger - A Membership Interest Purchase Agreement between PEDCO and RJ Corp. (the “Membership Purchase”), pursuant to which (i) PEDCO transferred 50% ownership of PEDCO MSL Merger Sub LLC, LLC, a Nevada limited liability company (“MSL Merger Sub”), which was wholly-owned by PEDCO to RJ Corp., (ii) PEDCO’s wholly-owned subsidiary, Pacific Energy Development MSL, LLC (“PEDCO MSL”) merged with and into MSL Merger Sub, with MSL Merger Sub being the surviving entity in the merger, and (iii) MSL Merger Sub changed its name to Pacific Energy Development MSL, LLC. The effective result of the Membership Purchase and Plan of Merger was that RJ Corp. now owns 50% of PEDCO MSL, which owns all of the interests in the Mississippian Asset. | |
As a result of the transactions effected by the Red Hawk Purchase, Asia Sixth Purchase, Membership Purchase and Plan of Merger, RJ Corp. acquired ownership of 50% of all of the Company’s oil and gas assets and properties acquired in connection with the Continental Acquisition, rights to 50% of the Company's right to acquire Asia Sixth which owns the oil and gas assets and properties in Kazakhstan pursuant to the Shares Subscription Agreement, and effective ownership of 50% of the Mississippian Property. In connection with the financing with RJ Corp, the Company will allocate a portion of the proceeds from the financing to the promissory notes and a portion to the sales of (i) 50% of the Continental asset, (ii) 50% of the Company's investment in Asia Sixth and (iii) 50% of the Mississippian asset. To the extent the proceeds of the financing exceed the portion allocated to the debt the Company will record a debt discount. To the extent the sales price attributable to the assets differs from the net book value, the Company will record a gain or loss on sale. The Company is currently assessing the fair value of the components of the transaction to determine the amounts attributable to debt and assets sold. | ||
Rescission of Shares and Warrants and Cancellation of Note | ||
As described in Note 14, the Company had issued into escrow to Yao Hang Finance (Hong Kong) Limited 6,666,667 shares of common stock and three-year warrants exercisable on a cash basis (i) an aggregate of 666,667 shares of common stock at $3.75 per share, (ii) an aggregate of 666,667 shares of common stock at $4.50 per share, and (iii) an aggregate of 666,667 shares of common stock at $5.25 per share in consideration for $20 million. | ||
The Lead Investor paid $10 million in cash on August 12, 2013, and entered into a common stock and Warrant Subscription Agreement (the “Subscription Agreement”), First Amendment to common stock and Warrant Subscription Agreement (the “Amendment”), and full-recourse promissory note (the “Note”), which Amendment and Note required that it pay the balance of $10 million in cash no later than December 1, 2013, with 3,333,333 of the shares of common stock issued to the Lead Investor in the Private Placement (the “Escrowed Shares”), as well as warrants exercisable for (i) an aggregate of 333,333 shares of common stock at $3.75 per share, (ii) an aggregate of 333,333 shares of common stock at $4.50 per share, and (iii) an aggregate of 333,333 shares of common stock at $5.25 per share (collectively (i), (ii) and (iii), the “Escrowed Warrants”), being held in escrow by the Company pending the Lead Investor’s payment in full of the $10 million due under the Note. | ||
The investor failed to pay the $10 million balance due under the Note by December 1, 2013. On December 1, 2013, the Company granted a verbal extension to the investor pending further discussions regarding the investment. Following discussions with the investor, the investor elected to forego making further investment. Accordingly, on March 7, 2014, the Company notified the investor that, effective immediately, the Escrowed Shares and Escrowed Warrants were rescinded as permitted pursuant to the terms of the Note, and the Note was cancelled and forgiven, with no further action required by the investor (the “Cancellation”). The stock subscription receivable related to 3,333,333 shares of common stock and 999,999 warrants for shares of common stock in the amount of $10 million was extinguished as of March 7, 2014. No gain or loss was recognized. | ||
SSA provides us rights to acquire an approximately 51% ownership in Asia Sixth, which holds an approximate 60% ownership interest in Aral Petroleum Capital Limited Partnership (“Aral”), a Kazakhstan entity, which holds a 100% operated working interest in a production license issued by the Republic of Kazakhstan that expires in 2034 in western Kazakhstan, we were required to pay the Note proceeds to Asia Sixth in the event we received such proceeds, provided that if such proceeds were not received, the required amount of the Share Subscription Agreement was to automatically be reduced from $20 million to $10 million (which $10 million deposit has previously been paid by the Company). Consequently, the rescission of the Note has no net effect on us or our obligations under the Share Subscription Agreement because (a) if such Note was paid in full we would have been required to pay such funds directly to Asia Sixth; and (b) the result of such funds not being paid only results in a decrease in the required deposit due to Asia Sixth. | ||
Letter Amending Cash Compensation Payable to South Texas Reservoir Alliance LLC | ||
On March 7, 2014, PEDCO MSL and South Texas Reservoir Alliance LLC (“STXRA”) entered into a letter agreement providing for $405,777 of cash consideration owed to STXRA for consulting services provided by STXRA to PEDCO MSL to be satisfied through the issuance to STXRA of 190,000 shares of restricted common stock of the Company, subject to the NYSE MKT’s approval of the additional listing of such shares. These shares were issued on March 24, 2014 at a market value of $444,600 at $2.34 per share, resulting in a loss on settlement of payables of $38,823. | ||
Amendment to Bridge Notes and Subordination and Intercreditor Agreements | ||
On March 7, 2014, the Company entered into a Second Amendment to Secured Promissory Notes (each, a “Second Amended Note,” and collectively, the “Second Amended Notes”) with all but one of the holders (each holder who agreed to such Second Amendment Notes, the “Amended Bridge Investors”). | ||
The Second Amended Notes amended the Bridge Notes to allow the holders the right to convert up to 100% of the outstanding and unpaid principal amount (but in increments of not less than 25% of the principal amount of each Bridge Note outstanding as of the entry into the Second Amended Notes and only up to four (4) total conversions of not less than 25% each); the Additional PIK; and all accrued and unpaid interest under each Bridge Note (collectively, the “Conversion Amount”) into common stock of the Company, subject to an additional listing application regarding such common stock being approved by the NYSE MKT. Upon a conversion, the applicable holder shall receive that number of shares of common stock as is determined by dividing the Conversion Amount by a conversion price (the “Conversion Price”) as follows: | ||
(A) prior to June 1, 2014, the Conversion Price shall be $2.15 per share; and | ||
(B) following June 1, 2014, the denominator used in the calculation described above shall be the greater of (i) 80% of the average of the closing price per share of the Company’s publicly traded common stock for the five (5) trading days immediately preceding the date of the conversion notice provide by the holder; and (ii) $0.50 per share. | ||
The Company concluded that the Note Purchase Amendment described above constituted a debt extinguishment rather than a debt modification because a significant conversion feature was added to the terms of the note. As a result, the Company will record a loss on debt extinguishment of $598,522 in the first quarter of 2014. | ||
In connection with the Note Purchase Amendment, the convertible debenture was also analyzed for a beneficial conversion feature after the debt modification at which time it was concluded that a beneficial conversion feature existed. Accordingly, a debt discount of $211,571 will be recorded in the first quarter of 2014 at the date of the modification. The debt discount will be amortized over the term of the Second Amended Notes. | ||
Additionally, each Bridge Investor entered into a Subordination and Intercreditor Agreement in favor of the Agent, subordinating and deferring the repayment of the Bridge Notes, and actions in connection with the security interests provided under the Bridge Notes, until full repayment of the Notes sold pursuant to the Note Purchase. The Subordination and Intercreditor Agreements also prohibit us from repaying the Bridge Notes until the Notes have been paid in full, except that we are allowed to repay the Bridge Notes from net proceeds received from the sale of common or preferred stock (i) in calendar year 2014 if such net proceeds received in such calendar year exceeds $35,000,000, (ii) in calendar year 2015 if such net proceeds received in such calendar year exceeds $50,000,000, and (iii) in calendar year 2016 if such net proceeds actually received in such calendar year exceeds $50,000,000. | ||
Frank C. Ingriselli, the Company’s President, Chief Executive Officer, and member of the Company’s Board of Directors, originally provided us $1.0 million in Bridge Notes (which was reduced to $500,000 in connection with payments made pursuant to the First Amendment) and Clark R. Moore, the Company’s Executive Vice President and General Counsel, originally provided us $50,000 in Bridge Notes (which was reduced to $25,000 in connection with payments made pursuant to the First Amendment), provided that prior to the Bridge Note Investors’ entry into the Amended Notes, Mr. Ingriselli and Mr. Moore transferred their Bridge Notes to non-affiliates of the Company and as such, as of the date of the Amended Notes, such officers no longer held any Bridge Notes or rights thereunder. | ||
Options and shares of restricted common stock issued | ||
On March 5, 2014, the Company granted 80,000 options to purchase common stock to an employee with an exercise price of $2.50 per share and a five-year term with a fair value of $69,132. | ||
On March 5, 2014, the Company granted 40,000 shares of its restricted common stock to an employee at a grant date fair value of $2.50 per share ,or $100,000, based on the market price on the date of grant. These shares vest 25% after the first year, 15% additional after 18 months, 15% additional after two years, 15% additional after 30 months, 15% additional after three years and the final 15% after 42 months. | ||
3_SUMMARY_OF_SIGNIFICANT_ACCOU1
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | |
Dec. 31, 2013 | ||
Accounting Policies [Abstract] | ' | |
Basis of Presentation and Principles of Consolidation | ' | |
The consolidated financial statements herein have been prepared in accordance with GAAP and include the accounts of the Company and those of its wholly-owned subsidiaries as follows: (i) Eagle Domestic Drilling Operations LLC, a Texas limited liability company (which was voluntarily dissolved effective July 10, 2013); (ii) Blast AFJ, Inc., a Delaware corporation; (iii) Pacific Energy Development Corp., a Nevada corporation; (iv) Pacific Energy Technology Services, LLC, a Nevada limited liability company; (v) Pacific Energy & Rare Earth Limited, a Hong Kong company; (vi) Blackhawk Energy Limited, a British Virgin Islands company; (vii) Pacific Energy Development MSL, LLC, a Nevada limited liability company, and (viii) as of December 31, 2013, White Hawk Petroleum, LLC, a Nevada limited liability company. All significant intercompany accounts and transactions have been eliminated. We also own 100% of Red Hawk Petroleum, LLC, a Nevada limited liability company, which was formed on January 16, 2014. As of March 7, 2014, we only held 50% of Pacific Energy Development MSL, LLC. All significant intercompany accounts and transactions have been eliminated. | ||
Equity Method Accounting for Joint Ventures | ' | |
The majority of the Company’s oil and gas interests are held all or in part by the following joint ventures which are collectively owned with affiliates of MIE Holdings: | ||
- Condor Energy Technology LLC, a Nevada limited liability company owned 20% by the Company and 80% by an affiliate of MIE Holdings. The Company accounts for its 20% ownership in Condor using the equity method; and | ||
- White Hawk Petroleum, LLC, a Nevada limited liability company owned 50% by the Company and 50% by an affiliate of MIE Holdings through December 30, 2013. Through December 30, 2013, the Company accounted for its 50% interest in White Hawk using the equity method. As a result of a series of transactions pursuant to which MIEJ divested its 50% interest in White Hawk as of December 31, 2013, described in greater detail in Note 5, White Hawk became a consolidated subsidiary effective on December 31, 2013. | ||
The Company evaluated its relationship with Condor and White Hawk to determine if either qualified as a variable interest entity ("VIE"), as defined in ASC 810-10, and whether the Company is the primary beneficiary, in which case consolidation would be required. The Company determined that both Condor and White Hawk qualified as VIE’s, but since the Company is not the primary beneficiary of either Condor or White Hawk, the Company concluded that consolidation was not required during 2013 for either entity (though White Hawk was consolidated as of December 31, 2013 following MIEJ’s withdrawal). | ||
Use of Estimates in Financial Statement Preparation | ' | |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates. Significant estimates generally include those with respect to the amount of recoverable oil and gas reserves, the fair value of financial instruments, oil and gas depletion, asset retirement obligations, and stock-based compensation. | ||
Cash, Cash Equivalents | ' | |
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of December 31, 2013 and 2012, cash equivalents consisted of money market funds and cash on deposit. | ||
Concentrations of Credit Risk | ' | |
Concentrations of Credit Risk. Financial instruments which potentially subject the Company to concentrations of credit risk include cash deposits placed with financial institutions. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2013, approximately $6,272,356 of the Company’s cash balances were uninsured. The Company has not experienced any losses on such accounts. | ||
Sales to three customers comprised 53%, 23% and 19% of the Company’s total oil and gas revenues for the year ended December 31, 2013. Sales to two customers comprised 71% and 29% of the Company’s total oil and gas revenues for the year ended December 31, 2012. The Company believes that, in the event that its primary customers are unable or unwilling to continue to purchase the Company’s production, there are a substantial number of alternative buyers for its production at comparable prices. | ||
Accounts Receivable | ' | |
Accounts receivable typically consist of oil and gas receivables. The Company has classified these as short-term assets in the balance sheet because the Company expects repayment or recovery within the next 12 months. The Company evaluates these accounts receivable for collectability considering the results of operations of these related entities and when necessary records allowances for expected unrecoverable amounts. To date, no allowances have been recorded. | ||
Revenue Recognition | ' | |
All revenue is recognized when persuasive evidence of an arrangement exists, the service or sale is complete, the price is fixed or determinable and collectability is reasonably assured. Revenue is derived from the sale of crude oil and natural gas. Revenue from crude oil and natural gas sales is recognized when the product is delivered to the purchaser and collectability is reasonably assured. The Company follows the “sales method” of accounting for oil and natural gas revenue, so it recognizes revenue on all natural gas or crude oil sold to purchasers, regardless of whether the sales are proportionate to its ownership in the property. A receivable or liability is recognized only to the extent that the Company has an imbalance on a specific property greater than its share of the expected remaining proved reserves. If collection is uncertain, revenue is recognized when cash is collected. | ||
Equipment | ' | |
Equipment is stated at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to expense as incurred. Renewals and betterments which extend the life or improve existing equipment are capitalized. Upon disposition or retirement of equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 3 to 10 years. | ||
Deferred Property Acquisition Costs | ' | |
The Company defers the costs, such as title and legal fees, related to oil and gas property acquisitions. At the time the acquisition is completed, these costs are reclassified and included as part of the purchase price of the property acquired. To the extent a property acquisition is not consummated these costs are expensed. | ||
Oil and Gas Properties, Successful Efforts Method | ' | |
The successful efforts method of accounting is used for oil and gas exploration and production activities. Under this method, all costs for development wells, support equipment and facilities, and proved mineral interests in oil and gas properties are capitalized. Geological and geophysical costs are expensed when incurred. Costs of exploratory wells are capitalized as exploration and evaluation assets pending determination of whether the wells find proved oil and gas reserves. Proved oil and gas reserves are the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, (i.e., prices and costs as of the date the estimate is made). Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions. | ||
Exploratory wells in areas not requiring major capital expenditures are evaluated for economic viability within one year of completion of drilling. The related well costs are expensed as dry holes if it is determined that such economic viability is not attained. Otherwise, the related well costs are reclassified to oil and gas properties and subject to impairment review. For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is under way or firmly planned. Otherwise the related well costs are expensed as dry holes. | ||
Exploration and evaluation expenditures incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above. | ||
Depreciation, depletion and amortization of capitalized oil and gas properties is calculated on a field by field basis using the unit of production method. Lease acquisition costs are amortized over the total estimated proved developed and undeveloped reserves and all other capitalized costs are amortized over proved developed reserves. | ||
Impairment of Long-Lived Assets | ' | |
The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of the asset by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposition. If the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and estimated fair value. | ||
Asset Retirement Obligations | ' | |
If a reasonable estimate of the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells can be made, the Company will record a liability (an asset retirement obligation or “ARO”) on its consolidated balance sheet and capitalize the present value of the asset retirement cost in oil and gas properties in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation assuming the normal operation of the asset, using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for the Company. After recording these amounts, the ARO will be accreted to its future estimated value using the same assumed cost of funds and the capitalized costs are depreciated on a unit-of-production basis over the estimated proved developed reserves. Both the accretion and the depreciation will be included in depreciation, depletion and amortization expense on our consolidated statements of operations. | ||
Income Taxes | ' | |
Income Taxes. The Company utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry-forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized. | ||
Stock-Based Compensation | ' | |
We utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. | ||
The Company estimates volatility by considering the historical stock volatility. The Company has opted to use the simplified method for estimating expected term, which is generally equal to the midpoint between the vesting period and the contractual term. | ||
Earnings or Loss per Common Share | ' | |
Basic earnings per common share equal net earnings or loss divided by weighted average common shares outstanding during the period. Diluted earnings per share include the impact on dilution from all contingently issuable shares, including options, warrants and convertible securities. The common stock equivalents from contingent shares are determined by the treasury stock method. The Company incurred net losses for the years ended December 31, 2013 and 2012, and therefore, basic and diluted earnings per share for those periods are the same as all potential common equivalent shares would be anti-dilutive. The Company excluded 1,404,724 and 1,218,206 potentially issuable shares of common stock related to options and 3,053,370 and 633,631 potentially issuable shares of common stock related to warrants due to their anti-dilutive effect for the years ended December 31, 2013 and 2012, respectively. | ||
Derivative Liability | ' | |
The Company follows Financial Accounting Standards Board (“FASB”), Derivatives and Hedging (“ASC 815-40”), which limits the extent to which the conversion or exercise price (the “strike price”) of an instrument can be adjusted for subsequent transactions. The Company utilizes a two-step process to determine whether an instrument is indexed to its stock: (a) evaluate the instrument’s contingent exercise provisions, if any and (b) evaluate the instrument’s settlement provisions. If it is determined the instrument is not indexed to the Company’s stock, the instrument is recognized as a derivative instrument at issuance and is measured at fair value at each reporting period and the change is recorded in earnings. | ||
Fair Value of Financial Instruments | ' | |
The Company follows FASB ASC 820, Fair Value Measurement (“ASC 820”), which clarifies fair value as an exit price, establishes a hierarchal disclosure framework for measuring fair value, and requires extended disclosures about fair value measurements. The provisions of ASC 820 apply to all financial assets and liabilities measured at fair value. | ||
As defined in ASC 820, fair value, clarified as an exit price, represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. | ||
As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value. | ||
Level 1 – Quoted prices in active markets for identical assets or liabilities. | ||
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | ||
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | ||
Recently Issued Accounting Pronouncements | ' | |
There were various accounting standards and interpretations issued during 2013 and 2011, none of which are expected to have a material impact on the Company’s financial position, operations or cash flows. | ||
In July 2012 the FASB issued ASU 2012-02 Testing Indefinite-Lived Intangible Assets for Impairment, which amends Topic 350 and gives companies the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Topic 350-30. This ASU shall be applied prospectively for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and early adoption is permitted. Implementation of the ASU is not expected to have a significant impact on the Company’s consolidated financial statements. | ||
Subsequent Events | ' | |
The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration. |
4_MERGER_AGREEMENT_PACIFIC_ENE1
4. MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Merger Agreement - Pacific Energy Development Corp Tables | ' | ||||
Summary of purchase price on date of acquisition | ' | ||||
Value of stock issued in acquisition | $ | 4,492,225 | |||
Cash advanced from PEDCO prior to merger | 507,757 | ||||
Merger expenses | 36,841 | ||||
Total Purchase Price | $ | 5,036,823 | |||
Current assets | 978 | ||||
Fixed assets | 112,089 | ||||
Oil and gas properties | 127,088 | ||||
Current liabilities | (646,787 | ) | |||
Asset retirement obligations assumed | (41,712 | ) | |||
Long-term liabilities | (1,334,836 | ) | |||
(1,783,180 | ) | ||||
Goodwill | $ | 6,820,003 | |||
Summary of loss on Extinguishment | ' | ||||
Loss on Extinguishment: | |||||
Estimated fair value of debt after modification | $ | 1,494,749 | |||
Less: Carrying value of pre-modification debt | (1,334,836 | ) | |||
Loss on debt extinguishment | $ | 159,913 | |||
Summary of post-Modification Debt | ' | ||||
Post-Modification Debt: | |||||
Estimated fair value of debt after modification | $ | 1,494,749 | |||
Less: beneficial conversion feature recorded as debt discount | (667,418 | ) | |||
Carrying value at date of Merger | $ | 827,331 | |||
Summary of loan activity | ' | ||||
Carrying value at merger | $ | 827,331 | |||
Accrued interest | 75,699 | ||||
Accretion of beneficial conversion feature recorded as debt discount | 667,418 | ||||
Less: amortization of debt premium | (159,913 | ) | |||
Less: Principal and accrued interest of convertible note converted to common stock | (1,029,545 | ) | |||
Less: Cash payments on principal | (211,809 | ) | |||
Balance of note forgiven by Centurion | (169,181 | ) | |||
Balance at December 31, 2012 | $ | -0- |
5_OIL_AND_GAS_PROPERTIES_Table
5. OIL AND GAS PROPERTIES (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Oil And Gas Properties Tables | ' | ||||||||||||||||||||
Summary of oil and gas activities by classification | ' | ||||||||||||||||||||
The following tables summarize the Company’s oil and gas activities by classification for the years ended December 31, 2013 and 2012: | |||||||||||||||||||||
January 1, | Additions | Disposals | Transfers | December 31, | |||||||||||||||||
2013 | 2013 | ||||||||||||||||||||
Oil and gas properties subject to amortization | $ | 2,479,535 | $ | 3,834,509 | $ | - | $ | - | $ | 6,314,044 | |||||||||||
Oil and gas properties not subject to amortization | 1,105,645 | 6,060,912 | - | - | 7,166,557 | ||||||||||||||||
Asset retirement costs | 16,552 | 11,529 | - | - | 28,081 | ||||||||||||||||
Accumulated depreciation, depletion and impairment | (255,662 | ) | (4,450,381 | ) | - | - | (4,706,043 | ) | |||||||||||||
Total oil and gas properties, net | $ | 3,346,070 | $ | 5,456,569 | $ | - | $ | - | $ | 8,802,639 | |||||||||||
January 1, | Additions | Disposals | Transfers | December 31, | |||||||||||||||||
2012 | 2012 | ||||||||||||||||||||
Oil and gas properties subject to amortization | $ | - | $ | 5,532,519 | $ | (3,750,000 | ) | $ | 697,016 | $ | 2,479,535 | ||||||||||
Oil and gas properties not subject to amortization | 1,724,234 | 78,427 | - | (697,016 | ) | 1,105,645 | |||||||||||||||
Asset retirement costs | - | 16,552 | - | - | 16,552 | ||||||||||||||||
Accumulated depreciation, depletion and impairment | - | (270,676 | ) | 15,014 | - | (255,662 | ) | ||||||||||||||
Total oil and gas properties, net | $ | 1,724,234 | $ | 5,356,822 | $ | (3,734,986 | ) | $ | - | $ | 3,346,070 | ||||||||||
Summary of purchase price term | ' | ||||||||||||||||||||
Cash paid at closing | $ | 1,500,000 | |||||||||||||||||||
Loan payable | 1,000,000 | -1 | |||||||||||||||||||
Series A Preferred Stock issued | 1,250,000 | -2 | |||||||||||||||||||
Total purchase price | $ | 3,750,000 | |||||||||||||||||||
Summary of allocation of aggregate contribution | ' | ||||||||||||||||||||
Asset: | Valuation | ||||||||||||||||||||
Tangible equipment | $ | 147,000 | |||||||||||||||||||
Proved oil and gas reserves | 2,958,936 | ||||||||||||||||||||
Unproved oil and gas leaseholds | 629,050 | ||||||||||||||||||||
Total | $ | 3,734,986 | |||||||||||||||||||
Summary of sale price | ' | ||||||||||||||||||||
Cash received at closing | $ | 500,000 | |||||||||||||||||||
Cash received on June 29, 2012 | 500,000 | ||||||||||||||||||||
Payment to Excellong E&P-2 | 1,000,000 | -1 | |||||||||||||||||||
Total cash consideration | 2,000,000 | ||||||||||||||||||||
Less: fair value of warrants issued at $3.75 per share | -1,586 | -2 | |||||||||||||||||||
Less: fair value of warrants issued at $4.50 per share | -1,000 | -2 | |||||||||||||||||||
Less: purchase price adjustment for net field income activity for March 2012 through sale date | -58,332 | -3 | |||||||||||||||||||
Total sale price | $ | 1,939,082 | |||||||||||||||||||
Summary of allocation of aggregate sale price | ' | ||||||||||||||||||||
Asset: | Valuation | ||||||||||||||||||||
Tangible equipment | $ | 76,015 | |||||||||||||||||||
Proved oil and gas reserves | 1,863,067 | ||||||||||||||||||||
Total | $ | 1,939,082 | |||||||||||||||||||
Summary of pro forma sale | ' | ||||||||||||||||||||
For the Year Ended | |||||||||||||||||||||
31-Dec-12 | |||||||||||||||||||||
PEDEVCO | E&P-2 | Combined | |||||||||||||||||||
Revenue | $ | 503,153 | $ | 266,867 | $ | 770,020 | |||||||||||||||
Lease operating costs | $ | (281,103 | ) | $ | (44,099 | ) | $ | (325,202 | ) | ||||||||||||
Net loss | $ | (12,013,011 | ) | $ | 222,768 | $ | (11,790,243 | ) | |||||||||||||
Net loss per common share | $ | (0.65 | ) | $ | 0.02 | $ | (0.63 | ) | |||||||||||||
Summary of assets and liabilities reclassified from equity investment | ' | ||||||||||||||||||||
Cash | $ | 91,114 | |||||||||||||||||||
Other current assets | 202,068 | ||||||||||||||||||||
Oil and gas properties, subject to amortization | 3,245,323 | ||||||||||||||||||||
Total assets | $ | 3,447,391 | |||||||||||||||||||
Current liabilities | $ | 1,279,426 | |||||||||||||||||||
Asset retirement obligations | 14,459 | ||||||||||||||||||||
Total liabilities | 1,293,885 | ||||||||||||||||||||
Total equity | 2,153,506 | ||||||||||||||||||||
Total liabilities and equity | $ | 3,447,391 |
7_EQUIPMENT_Tables
7. EQUIPMENT (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Equipment Tables | ' | ||||||||
Property and equipment | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Computer equipment | $ | 6,714 | $ | 6,714 | |||||
Tractor | - | - | |||||||
Service trailer | - | - | |||||||
AFJ Rig | 112,089 | 112,089 | |||||||
Subtotal | 118,803 | 118,803 | |||||||
Less: | |||||||||
Accumulated depreciation | (118,803 | ) | (30,920 | ) | |||||
Equipment, net | $ | - | $ | 87,883 |
8_NOTES_RECEIVABLE_Tables
8. NOTES RECEIVABLE (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Notes to Financial Statements | ' | |||||||||
Summary of note receivable activity | ' | |||||||||
Date of Advance | Maturity Date | 2013 | 2012 | |||||||
Balance as of beginning of year | $ | 1,419,253 | $ | - | ||||||
24-Sep-12 | 24-Sep-15 | - | 276,326 | |||||||
1-Nov-12 | 1-Nov-15 | - | 1,142,927 | |||||||
4-Jan-13 | 4-Jan-16 | 1,297,038 | - | |||||||
11-Jan-13 | 11-Jan-16 | 1,011,250 | - | |||||||
30-Jun-13 | 30-Jun-16 | 134,479 | - | |||||||
31-Jul-13 | 31-Jul-16 | 203,088 | - | |||||||
31-Dec-13 | 31-Dec-16 | 940,000 | - | |||||||
Balance at end of year | $ | 5,005,108 | $ | 1,419,253 |
9_EQUITY_METHOD_INVESTMENTS_Ta
9. EQUITY METHOD INVESTMENTS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Summary of financial information | ' | ||||||||
Summarized balance sheets: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Current assets | $ | 5,734,851 | $ | 5,182,717 | |||||
Oil and gas properties, net | 2,289,310 | 9,742,120 | |||||||
Other long –term assets | 115,670 | 1,078,220 | |||||||
Total assets | $ | 8,139,831 | $ | 16,003,057 | |||||
Current liabilities | $ | 3,708,123 | $ | 2,952,710 | |||||
Notes payable to affiliates | 31,477,643 | 12,240,161 | |||||||
Other long term liabilities | 11,587 | 8,420 | |||||||
Total liabilities | 35,197,353 | 15,201,291 | |||||||
Members’ equity (deficit) | -27,057,522 | 801,766 | |||||||
Total liabilities and members’ equity (deficit) | $ | 8,139,831 | $ | 16,003,057 | |||||
Summarized statements of operations: | |||||||||
For the Year Ended December 31, | For the Year Ended December 31, | ||||||||
2013 | 2012 | ||||||||
Revenue | $ | 4,779,966 | $ | 653,802 | |||||
Lease operating expenses | (1,850,818 | ) | (424,872 | ) | |||||
Exploration costs | (365,938 | ) | -759,857 | ||||||
Selling, general and administrative expenses | (1,111,912 | ) | -806,285 | ||||||
Depletion | (2,679,676 | ) | (220,412 | ) | |||||
Impairment | (25,982,745 | ) | (369,037 | ) | |||||
Interest expense | (921,712 | ) | -213,839 | ||||||
Net loss | $ | (28,132,835 | ) | $ | -2,140,500 | ||||
Condor Energy Technology, LLC [Member] | ' | ||||||||
Summary of equity investment | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Beginning balance | $ | 160,353 | $ | 588,453 | |||||
Contributions | - | - | |||||||
Equity in net loss at 20% | (5,353,930 | ) | (428,100 | ) | |||||
Notes receivable from Condor | 5,193,577 | - | |||||||
Ending balance | $ | - | $ | 160,353 | |||||
White Hawk [Member] | ' | ||||||||
Summary of equity investment | ' | ||||||||
31-Dec-13 | December 31, 2012 | ||||||||
Beginning balance | $ | 1,937,981 | $ | 3,734,986 | |||||
Sale of equity investment | - | (1,867,493 | ) | ||||||
Equity in net earnings at 50% | 91,223 | 70,488 | |||||||
Forfeiture of MIE’s capital account recorded in additional paid-in capital | 124,301 | - | |||||||
Consolidation of equity investment | -2,153,505 | - | |||||||
Ending balance | $ | - | $ | 1,937,981 |
11_DERIVATIVE_LIABILITIES_Tabl
11. DERIVATIVE LIABILITIES (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Derivative Liabilities Tables | ' | ||||||||||||||||||||
Activity for derivative warrant instruments | ' | ||||||||||||||||||||
Description | Balance at | Initial valuation of derivative liabilities upon issuance | Decrease in fair | Exercise of | Balance at | ||||||||||||||||
December 31, | of warrants | value of derivative liability | warrants | December 31, | |||||||||||||||||
2012 | 2013 | ||||||||||||||||||||
Bridge Warrants | $ | - | $ | 14,005 | $ | (14,005 | ) | $ | - | $ | - | ||||||||||
Total | $ | - | $ | 14,005 | $ | (14,005 | ) | $ | - | $ | - | ||||||||||
Assumptions used | ' | ||||||||||||||||||||
Description | |||||||||||||||||||||
Common stock issuable upon exercise of warrants | 85,722 | ||||||||||||||||||||
Market value of common stock on date of measurement (1) | $ | 5.25 | |||||||||||||||||||
Adjusted exercise price | $ | 5.25 | |||||||||||||||||||
Risk free interest rate (2) | 0.6 | % | |||||||||||||||||||
Warrant lives in years | 4 | ||||||||||||||||||||
Expected volatility (3) | 85 | % | |||||||||||||||||||
Expected dividend yield (4) | 0 | % | |||||||||||||||||||
-1 | The market value of common stock is the stock price at the close of trading on the date of issuance or at period-end, as applicable. | ||||||||||||||||||||
-2 | The risk-free interest rate was determined by management using the 3 or 5 - year Treasury Bill as of the respective offering or measurement date. | ||||||||||||||||||||
-3 | Because the Company does not have adequate trading history to determine its historical trading volatility, the volatility factor was estimated by management using the historical volatilities of comparable companies in the same industry and region. | ||||||||||||||||||||
-4 | Management determined the dividend yield to be 0% based upon its expectation that it will not pay dividends for the foreseeable future. |
15_STOCK_OPTIONS_AND_WARRANTS_
15. STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
Stock Option [Member] | ' | ||||||||||||||
Schedule of Stock Option and Warrant Activity | ' | ||||||||||||||
Option activity during the year ended December 31, 2013 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (years) | |||||||||||||
Outstanding at January 1, 2013 | 1,218,206 | $ | 0.92 | 9.3 | |||||||||||
Granted | 104,500 | 3.75 | |||||||||||||
Rescission of granted options | 127,800 | 0.48 | |||||||||||||
Exercised | (39,000 | ) | 0.28 | ||||||||||||
Forfeited and cancelled | (6,782 | ) | 21.99 | ||||||||||||
Outstanding at December 31, 2013 | 1,404,724 | $ | 0.8 | 8.09 | |||||||||||
Exercisable at December 31, 2013 | 1,182,309 | $ | 0.57 | 8.36 | |||||||||||
Option activity during the year ended December 31, 2012 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (years) | |||||||||||||
Outstanding at January 1, 2012 | 176,667 | $ | 0.24 | 9.75 | |||||||||||
Granted under Blast merger | 12,973 | 125.15 | |||||||||||||
Granted | 1,221,667 | 0.49 | |||||||||||||
Exercised | (190,333 | ) | 0.46 | ||||||||||||
Forfeited and cancelled | (2,768 | ) | 381.63 | ||||||||||||
Outstanding at December 31, 2012 | 1,218,206 | $ | 0.92 | 9.3 | |||||||||||
Exercisable at December 31, 2012 | 561,372 | $ | 1.44 | 9.2 | |||||||||||
Schedule of Stock Option and Warrant Exercisable | ' | ||||||||||||||
Summary of options outstanding and exercisable as of December 31, 2013: | |||||||||||||||
Exercise Price | Weighted Average | Options Outstanding | Options Exercisable | ||||||||||||
Remaining Life (years) | |||||||||||||||
$ | 0.24 | 0.81 | 146,667 | 146,667 | |||||||||||
0.3 | 0.34 | 59,335 | 50,500 | ||||||||||||
0.51 | 6.58 | 1,090,800 | 981,720 | ||||||||||||
3.75 | 0.34 | 104,500 | - | ||||||||||||
30.24 | 0.02 | 2,976 | 2,976 | ||||||||||||
67.2 | - | 446 | 446 | ||||||||||||
$ | 0.24 to $67.20 | 8.09 | 1,404,724 | 1,182,309 | |||||||||||
Summary of options outstanding and exercisable as of December 31, 2012: | |||||||||||||||
Exercise Price | Weighted Average | Options Outstanding | Options Exercisable | ||||||||||||
Remaining Life (years) | |||||||||||||||
$ | 0.24 | 1.08 | 149,667 | 103,667 | |||||||||||
0.3 | 0.6 | 80,000 | 35,833 | ||||||||||||
0.51 | 7.6 | 978,333 | 411,666 | ||||||||||||
30.24 | 0.02 | 5,953 | 5,953 | ||||||||||||
33.6 | - | 2,247 | 2,247 | ||||||||||||
67.2 | - | 893 | 893 | ||||||||||||
127.68 | - | 36 | 36 | ||||||||||||
134.4 | - | 298 | 298 | ||||||||||||
204.96 | - | 36 | 36 | ||||||||||||
268.8 | - | 743 | 733 | ||||||||||||
$ | 0.24 to $268.80 | 9.3 | 1,218,206 | 561,372 | |||||||||||
Warrant [Member] | ' | ||||||||||||||
Schedule of Stock Option and Warrant Activity | ' | ||||||||||||||
Warrant activity during the year ended December 31, 2013 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (# years) | |||||||||||||
Outstanding at January 1, 2012 | 633,631 | $ | 18.25 | 2.43 | |||||||||||
Granted | 2,452,408 | 4.38 | |||||||||||||
Exercised | (4,900 | ) | 2.25 | ||||||||||||
Forfeited and cancelled | (27,769 | ) | |||||||||||||
Outstanding at December 31, 2013 | 3,053,370 | $ | 4.12 | 2.49 | |||||||||||
Exercisable at December 31, 2013 | 3,053,370 | $ | 4.12 | 2.49 | |||||||||||
Warrant activity during the year ended December 31, 2012 was: | |||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (# years) | |||||||||||||
Outstanding at January 1, 2012 | 193,334 | $ | 1.89 | 4.04 | |||||||||||
Granted under Blast merger | 68,736 | 141.81 | |||||||||||||
Granted | 479,195 | 3.42 | |||||||||||||
Exercised | (106,890 | ) | 1.56 | ||||||||||||
Forfeited and cancelled | (744 | ) | 33.6 | ||||||||||||
Outstanding at December 31, 2012 | 633,631 | $ | 18.25 | 2.43 | |||||||||||
Exercisable at December 31, 2012 | 633,631 | $ | 18.25 | 2.43 | |||||||||||
Schedule of Stock Option and Warrant Exercisable | ' | ||||||||||||||
Summary of warrants outstanding and exercisable as of December 31, 2013 was as follows: | |||||||||||||||
Exercise Price | Weighted Average Remaining Life (years) | Warrants Outstanding | Warrants Exercisable | ||||||||||||
$ | 0.24 | 0.08 | 33,334 | 33,334 | |||||||||||
0.3 | 0.09 | 33,333 | 33,333 | ||||||||||||
2.25 | 0.08 | 200,961 | 200,961 | ||||||||||||
2.34 | 0.22 | 166,684 | 166,684 | ||||||||||||
3.75 | 0.65 | 900,001 | 900,001 | ||||||||||||
4.5 | 0.65 | 900,001 | 900,001 | ||||||||||||
5.25 | 0.72 | 819,056 | 819,056 | ||||||||||||
$ | 0.24 to $5.25 | 2.49 | 3,053,370 | 3,053,370 | |||||||||||
Summary of warrants outstanding and exercisable as of December 31, 2013 was as follows: done | |||||||||||||||
Exercise Price | Weighted Average Remaining Life (years) | Warrants Outstanding | Warrants Exercisable | ||||||||||||
$ | 0.08 | 0.46 | 33,334 | 33,334 | |||||||||||
0.1 | 0.49 | 33,334 | 33,334 | ||||||||||||
0.75 | 0.72 | 205,862 | 205,862 | ||||||||||||
1.12 | 0 | 4,882 | 4,882 | ||||||||||||
1.25 | 0.37 | 166,667 | 166,667 | ||||||||||||
1.5 | 0.37 | 166,667 | 166,667 | ||||||||||||
22.4 | 0 | 2,529 | 2,529 | ||||||||||||
112 | 0 | 2,232 | 2,232 | ||||||||||||
161.28 | 0.02 | 18,124 | 18,124 | ||||||||||||
$ | 0.08 to $161.28 | 2.43 | 633,631 | 633,631 |
17_INCOME_TAXES_Tables
17. INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Deferred income taxes assets | ' | ||||||||
Noncurrent Deferred Tax Assets (Liabilities) | Year ended | Year ended | |||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Difference in depreciation, depletion, and capitalization methods – oil and natural gas properties | $ | 562,342 | $ | 18,845 | |||||
Net operating losses | 4,131,374 | 1,761,066 | |||||||
Impairment – oil and natural gas properties | (1,122,953 | ) | (61,289 | ) | |||||
Other | (33,885 | ) | (43,809 | ) | |||||
Total noncurrent deferred tax asset | 3,536,878 | 1,674,813 | |||||||
Less valuation allowance | (3,536,878 | ) | (1,674,813 | ) | |||||
Total deferred tax assets | $ | - | $ | - |
18_PRIOR_YEAR_RESTATEMENTS_Tab
18. PRIOR YEAR RESTATEMENTS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
Summary of impact on previously reported balance sheet | ' | ||||||||
As Reported | As Restated | ||||||||
Notes receivable – related parties | $ | 3,062,390 | $ | 2,786,064 | |||||
Total assets | $ | 11,423,050 | $ | 11,146,724 | |||||
Series A convertible preferred stock | $ | 20,371 | $ | 18,704 | |||||
Additional paid in capital | $ | 18,138,916 | $ | 18,140,583 | |||||
Stock subscriptions receivable | $ | - | $ | (276,326 | ) | ||||
Total shareholder’s equity | $ | (5,404,150 | ) | $ | (5,127,824 | ) | |||
Total liabilities and shareholders' equity | $ | 11,423,050 | $ | 11,146,724 |
3_SUMMARY_OF_SIGNIFICANT_ACCOU2
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |||||||||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 30, 2013 | Dec. 31, 2013 | Dec. 30, 2013 | |
Customers one [Member] | Customers one [Member] | Customers two [Member] | Customers two [Member] | Customers three [Member] | White Hawk Petroleum, LLC [Member] | MIE Holdings [Member] | MIE Holdings [Member] | |||
Equity method ownership percentage | ' | ' | ' | ' | ' | ' | ' | 50.00% | ' | 50.00% |
Equity method ownership intrest | ' | ' | ' | ' | ' | ' | ' | 50.00% | 50.00% | ' |
Cash uninsured amount | ' | $272,356 | ' | ' | ' | ' | ' | ' | ' | ' |
Oil and gas revenues, (in percentage) | ' | ' | 64.00% | 71.00% | 24.00% | 29.00% | 12.00% | ' | ' | ' |
Potentially issuable shares of common stock related to options | 1,404,724 | 1,218,206 | ' | ' | ' | ' | ' | ' | ' | ' |
Potentially issuable shares of common stock related to warrants | 3,053,370 | 633,631 | ' | ' | ' | ' | ' | ' | ' | ' |
4_MERGER_AGREEMENT_PACIFIC_ENE2
4. MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP (Details) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Merger Agreement - Pacific Energy Development Corp | ' |
Value of stock issued in acquisition | $4,492,225 |
Cash advanced from PEDCO prior to merger | 507,757 |
Merger expenses | 36,841 |
Total Purchase Price | 5,036,823 |
Current assets | 978 |
Fixed assets | 112,089 |
Oil and gas properties | 127,088 |
Current liabilities | -646,787 |
Asset retirement obligations assumed | -41,712 |
Long-term liabilities | -1,334,836 |
Total | -1,783,180 |
Goodwill | $6,820,003 |
4_MERGER_AGREEMENT_PACIFIC_ENE3
4. MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Loss on Extinguishment: | ' |
Estimated fair value of debt after modification | $1,494,749 |
Less: Carrying value of pre-modification debt | -1,334,836 |
Loss on debt extinguishment | $159,913 |
4_MERGER_AGREEMENT_PACIFIC_ENE4
4. MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP (Details 2) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Post-Modification Debt: | ' |
Estimated fair value of debt after modification | $1,494,749 |
Less: beneficial conversion feature recorded as debt discount | -667,418 |
Carrying value at date of Merger | $827,331 |
4_MERGER_AGREEMENT_PACIFIC_ENE5
4. MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP (Details 3) (USD $) | Dec. 31, 2012 |
Merger Agreement - Pacific Energy Development Corp Details 3 | ' |
Carrying value at merger | $827,331 |
Accrued interest | 75,699 |
Accretion of beneficial conversion feature recorded as debt discount | 667,418 |
Less: amortization of debt premium | -159,913 |
Less: Principal and accrued interest of convertible note converted to common stock | -1,029,545 |
Less: Cash payments on principal | -211,809 |
Balance of note forgiven by Centurion | -169,181 |
Balance at December 31, 2012 | $0 |
4_MERGER_AGREEMENT_PACIFIC_ENE6
4. MERGER AGREEMENT - PACIFIC ENERGY DEVELOPMENT CORP (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Merger Agreement - Pacific Energy Development Corp Details Narrative | ' |
Loss on debt extinguishment | $159,913 |
5_OIL_AND_GAS_PROPERTIES_Detai
5. OIL AND GAS PROPERTIES (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Oil and gas properties subject to amortization | $6,314,044 | $2,479,535 | ' | |
Oil and gas properties not subject to amortization | 7,166,557 | 1,105,645 | ' | |
Asset retirement costs | 28,081 | 16,552 | ' | |
Accumulated depreciation depletion and impairment | -4,706,043 | -255,662 | ' | |
Total oil and gas properties, net | 8,802,639 | 3,346,070 | [1] | ' |
Additions [Member] | ' | ' | ' | |
Oil and gas properties subject to amortization | 3,834,509 | 5,532,519 | ' | |
Oil and gas properties not subject to amortization | 6,060,912 | 78,427 | 1,724,234 | |
Asset retirement costs | 11,529 | 16,552 | ' | |
Accumulated depreciation depletion and impairment | -4,450,381 | -270,676 | ' | |
Total oil and gas properties, net | 5,456,569 | 5,356,822 | 1,724,234 | |
Disposals [Member] | ' | ' | ' | |
Oil and gas properties subject to amortization | ' | -3,750,000 | ' | |
Oil and gas properties not subject to amortization | ' | ' | ' | |
Asset retirement costs | ' | ' | ' | |
Accumulated depreciation depletion and impairment | ' | 15,014 | ' | |
Total oil and gas properties, net | ' | -3,734,986 | ' | |
Transfers [Member] | ' | ' | ' | |
Oil and gas properties subject to amortization | ' | 697,016 | ' | |
Oil and gas properties not subject to amortization | ' | -697,016 | ' | |
Asset retirement costs | ' | ' | ' | |
Accumulated depreciation depletion and impairment | ' | ' | ' | |
Total oil and gas properties, net | ' | ' | ' | |
[1] | Restated |
5_OIL_AND_GAS_PROPERTIES_Detai1
5. OIL AND GAS PROPERTIES (Details 1) (USD $) | Dec. 31, 2012 |
Oil And Gas Properties Details 1 | ' |
Cash paid at closing | $1,500,000 |
Loan payable | 1,000,000 |
Series A Preferred Stock issued | 1,250,000 |
Total purchase price | $3,750,000 |
5_OIL_AND_GAS_PROPERTIES_Detai2
5. OIL AND GAS PROPERTIES (Details 2) (USD $) | Dec. 31, 2012 |
Asset: | ' |
Tangible equipment | $147,000 |
Proved oil and gas reserves | 2,958,936 |
Unproved oil and gas leaseholds | 629,050 |
Total | $3,734,986 |
5_OIL_AND_GAS_PROPERTIES_Detai3
5. OIL AND GAS PROPERTIES (Details 3) (USD $) | Dec. 31, 2012 |
Oil And Gas Properties Details 3 | ' |
Cash received at closing | $500,000 |
Cash received on June 29, 2012 | 500,000 |
Payment to Excellong E&P-2 | 1,000,000 |
Total cash consideration | 2,000,000 |
Less: fair value of warrants issued at $3.75 per share | -1,586 |
Less: fair value of warrants issued at $4.50 per share | -1,000 |
Less: purchase price adjustment for net field income activity for March 2012 through sale date | -58,332 |
Total sale price | $1,939,082 |
5_OIL_AND_GAS_PROPERTIES_Detai4
5. OIL AND GAS PROPERTIES (Details 4) (USD $) | Dec. 31, 2012 |
Asset: | ' |
Tangible equipment | $76,015 |
Proved oil and gas reserves | 1,863,067 |
Total sale price | $1,939,082 |
5_OIL_AND_GAS_PROPERTIES_Detai5
5. OIL AND GAS PROPERTIES (Details 5) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenue | ' | $770,020 |
Lease operating costs | ' | -325,202 |
Net loss | -18,145,463 | -12,013,011 |
Net loss per common share | ($1.07) | ($1.94) |
PEDEVCO [Member] | ' | ' |
Revenue | ' | 503,153 |
Lease operating costs | ' | -281,103 |
Net loss | ' | -12,013,011 |
Net loss per common share | ' | ($0.65) |
E&P-2 [Member] | ' | ' |
Revenue | ' | 266,867 |
Lease operating costs | ' | -44,099 |
Net loss | ' | $222,768 |
Net loss per common share | ' | $0.02 |
5_OIL_AND_GAS_PROPERTIES_Detai6
5. OIL AND GAS PROPERTIES (Details 6) (USD $) | Dec. 31, 2013 |
Oil And Gas Properties Details 6 | ' |
Other current assets | $202,068 |
Oil and gas properties | 3,245,323 |
Total assets | 3,447,391 |
Current liabilities | 1,279,426 |
Asset retirement obligations | 14,459 |
Total liabilities | 1,293,885 |
Total equity | 2,153,506 |
Total liabilities and equity | $3,447,391 |
5_OIL_AND_GAS_PROPERTIES_Detai7
5. OIL AND GAS PROPERTIES (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
Depletion | $90,414 | $346,020 | ' |
Impairment expense for expired leasehold costs | 180,262 | 356,902 | ' |
Property impairment | 2,945,903 | 2,945,903 | 0 |
Drilling costs | ' | -1,050,286 | ' |
Description of company ownership interest | ' | 'White Hawk used the proceeds of the sale plus 50% of White HawkBs cash balance to pay MIEJ for its share of ownership in White Hawk and in settlement of the outstanding balance of its Promissory Note dated June 4, 2012 to MIEJ. MIEJ then withdrew from White Hawk as a member on December 31, 2013. As a result of the transactions, the Company became the 100% owner of White Hawk, and the Company recorded $124,301 of contributed capital from MIEJ. | ' |
White Hawk [Member] | ' | ' | ' |
Depletion | ' | 286,242 | ' |
Drilling costs | ' | 2,784,222 | ' |
Equity method ownership intrest | 50.00% | 50.00% | ' |
Waves 1H | ' | ' | ' |
Drilling costs | ' | 460,832 | ' |
Logan 2H | ' | ' | ' |
Drilling costs | ' | $589,455 | ' |
7_EQUIPMENT_Details
7. EQUIPMENT (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | |
Equipment, Gross | $118,803 | $118,803 | |
Less: Accumulated depreciation | -118,803 | -30,920 | |
Equipment, Net | ' | 87,883 | [1] |
Computer Equipment [Member] | ' | ' | |
Equipment, Gross | 6,714 | 6,714 | |
Tractor [Member] | ' | ' | |
Equipment, Gross | ' | ' | |
Service Trailer [Member] | ' | ' | |
Equipment, Gross | ' | ' | |
AFJ Rig [Member] | ' | ' | |
Equipment, Gross | $112,089 | $112,089 | |
[1] | Restated |
7_EQUIPMENT_Details_Narrative
7. EQUIPMENT (Details Narrative) (USD $) | 12 Months Ended | 23 Months Ended |
Dec. 31, 2013 | Dec. 31, 2012 | |
Equipment Details Narrative | ' | ' |
Depreciation expense | $87,884 | $30,258 |
8_NOTES_RECEIVABLE_Details
8. NOTES RECEIVABLE (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Note receivable | $5,005,108 | $1,419,253 |
September 24, 2012 [Member] | ' | ' |
Note receivable | ' | 276,326 |
November 1, 2012 [Member] | ' | ' |
Note receivable | ' | 1,142,927 |
January 4, 2016 [Member] | ' | ' |
Note receivable | 1,297,038 | ' |
January 11, 2016 [Member] | ' | ' |
Note receivable | 1,011,250 | ' |
June 30, 2016 [Member] | ' | ' |
Note receivable | 134,479 | ' |
July 31, 2016 [Member] | ' | ' |
Note receivable | 203,088 | ' |
December 31, 2016 [Member] | ' | ' |
Note receivable | $940,000 | ' |
8_NOTES_RECEIVABLE_Details_Nar
8. NOTES RECEIVABLE (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 |
Condor [Member] | White Hawk | |||
Note receivable | $5,005,108 | $1,419,253 | $5,005,108 | $1,252,393 |
Accrued interest | ' | ' | 188,469 | ' |
Borrowing availability | ' | ' | 2,994,892 | ' |
Reduced note receivable | ' | ' | 376,458 | ' |
Net losses | ' | ' | 273,448 | ' |
Residual value | ' | ' | $160,353 | ' |
9_EQUITY_METHOD_INVESTMENTS_De
9. EQUITY METHOD INVESTMENTS (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Equity Method Investments and Joint Ventures [Abstract] | ' | ' |
Beginning balance | $160,353 | $588,453 |
Contributions | ' | ' |
Equity in net loss at 20% | -5,353,930 | -428,100 |
Allocation of losses in excess of equity investment to: | ' | ' |
Notes receivable from Condor | 5,193,577 | ' |
Ending balance | ' | $160,353 |
9_EQUITY_METHOD_INVESTMENTS_De1
9. EQUITY METHOD INVESTMENTS (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Current assets | $6,974,233 | $2,824,273 | [1] | ' |
Oil and gas properties, net | 8,802,639 | 3,346,070 | [1] | ' |
Total assets | 25,800,605 | 11,146,724 | [1] | ' |
Current liabilities | 14,838,318 | 4,709,602 | [1] | ' |
Total liabilities | 14,913,765 | 4,768,900 | [1] | ' |
Total stockholders equity | 10,886,840 | 5,127,824 | [1] | 888,553 |
Total liabilities and members' equity (deficit) | 25,800,606 | 11,146,724 | [1] | ' |
Condor [Member] | ' | ' | ' | |
Current assets | 4,224,369 | 5,182,717 | ' | |
Oil and gas properties, net | 3,533,915 | 9,742,120 | ' | |
Other long - term assets | 108,000 | 1,078,220 | ' | |
Total assets | 7,866,284 | 16,003,057 | ' | |
Current liabilities | 3,708,123 | 2,952,710 | ' | |
Notes payable to affiliates | 31,477,643 | 12,240,161 | ' | |
Other long term liabilities | 11,587 | 8,420 | ' | |
Total liabilities | 35,197,353 | 15,201,291 | ' | |
Total stockholders equity | 10,886,840 | 801,766 | ' | |
Total liabilities and members' equity (deficit) | $7,866,284 | $16,003,057 | ' | |
[1] | Restated |
9_EQUITY_METHOD_INVESTMENTS_De2
9. EQUITY METHOD INVESTMENTS (Details 2) (USD $) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues | ' | ' | $770,020 |
Exploration costs | ' | -1,050,286 | ' |
Selling, general and administrative expenses | ' | 7,149,103 | 3,729,525 |
Depletion | 90,414 | 346,020 | ' |
Interest expense | ' | 1,591,405 | 986,248 |
Net loss | ' | -18,145,463 | -12,013,011 |
Condor Energy | ' | ' | ' |
Revenues | ' | 4,779,966 | 653,802 |
Other lease operating expenses | ' | -1,850,818 | -424,872 |
Exploration costs | ' | -365,938 | -759,857 |
Selling, general and administrative expenses | ' | -1,111,912 | -806,285 |
Depletion | ' | -2,679,676 | -220,412 |
Impairment | ' | -25,982,745 | -369,037 |
Interest expense | ' | -921,712 | -213,839 |
Net loss | ' | ($28,132,835) | ($2,140,500) |
9_EQUITY_METHOD_INVESTMENTS_De3
9. EQUITY METHOD INVESTMENTS (Details 3) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Equity Method Investments Details 3 | ' | ' |
Beginning balance | $1,937,981 | $3,734,986 |
Sale of equity investment | ' | -1,867,493 |
Equity in net earnings at 50% | 91,223 | 70,488 |
Forfeiture of MIE's capital account recorded in additional paid-in capital | 124,301 | ' |
Consolidation of equity investment | -2,153,505 | ' |
Ending balance | ' | $1,937,981 |
9_EQUITY_METHOD_INVESTMENTS_De4
9. EQUITY METHOD INVESTMENTS (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2013 |
White Hawk [Member] | Condor [Member] | Condor [Member] | |||
Note receivable | $5,005,108 | $1,419,253 | $332,974 | ' | $5,005,108 |
Unrecognized losses in excess of basis | ' | ' | ' | ' | 'The Company has unrecognized losses in excess of basis of 272637 |
Accrued interest | 585,777 | ' | 460 | 16,963 | 188,469 |
Management services fee | ' | ' | ' | 81,124 | 75,131 |
Receivable related to working interest in Niobrara Asset | ' | ' | ' | 112,488 | 47,076 |
Loan to Condor for production related expense | ' | ' | ' | 112,069 | 59,448 |
Loan to Condor for capital expenditure | ' | ' | ' | $810,043 | $2,278,266 |
10_NOTES_PAYABLE_Details_Narra
10. NOTES PAYABLE (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Balance owed with accrued interest | ' | $2,206,233 |
Interest expense | 1,591,405 | 986,248 |
Bridge Note Financing | ' | ' |
Interest expense | 69,984 | ' |
Bridge Warrants | ' | ' |
Interest expense | 261,296 | ' |
Unamortized debt discount | 177,035 | ' |
PIK and Additional PIK | ' | ' |
Interest expense | 403,979 | ' |
Unamortized debt discount | 233,521 | ' |
Centurion Credit Funding LLC | ' | ' |
Principal and interest balance | ' | 169,181 |
MIE Jurassic Energy Corporation | ' | ' |
Balance owed with accrued interest | 585,777 | ' |
Principal and interest balance | $6,170,000 | ' |
11_DERIVATIVE_LIABILITIES_Deta
11. DERIVATIVE LIABILITIES (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Beginning Balance | ' |
Initial valuation of derivative liabilities upon issuance of warrants | 14,005 |
Decrease in fair value of derivative liability | -14,005 |
Exercise of warrants | 11,025 |
Ending Balance | ' |
Bridge Warrants | ' |
Beginning Balance | ' |
Initial valuation of derivative liabilities upon issuance of warrants | 14,005 |
Decrease in fair value of derivative liability | -14,005 |
Exercise of warrants | ' |
Ending Balance | ' |
11_DERIVATIVE_LIABILITIES_Deta1
11. DERIVATIVE LIABILITIES (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | ||
Derivative Liabilities Details 1 | ' | |
Common stock issuable upon exercise of warrants | 85,722 | |
Market value of common stock on date of measurement | $5.25 | [1] |
Adjusted exercise price | $5.25 | |
Risk free interest rate | 0.60% | [2] |
Warrant lives in years | '4 years | |
Expected volatility | 85.00% | [3] |
Expected dividend yield | 0.00% | [4] |
[1] | The market value of common stock is the stock price at the close of trading on the date of issuance or at period-end, as applicable. | |
[2] | The risk-free interest rate was determined by management using the 3 or 5 - year Treasury Bill as of the respective offering or measurement date. | |
[3] | Because the Company does not have adequate trading history to determine its historical trading volatility, the volatility factor was estimated by management using the historical volatilities of comparable companies in the same industry and region. | |
[4] | Management determined the dividend yield to be 0% based upon its expectation that it will not pay dividends for the foreseeable future. |
13_PREFERRED_STOCK_Details_Nar
13. PREFERRED STOCK (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Preferred Stock Details Narrative | ' | ' |
Series A convertible preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Series A convertible preferred stock, par value | $0.00 | $0.00 |
Series A preferred stock outstanding | 0 | 6,234,845 |
14_COMMON_STOCK_Details_Narrat
14. COMMON STOCK (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Common Stock Details Narrative | ' | ' |
Common stock issued | 200,000,000 | 200,000,000 |
Common stock issued per share | $0.00 | $0.00 |
Share Forfeiture | 233,334 | ' |
15_STOCK_OPTIONS_AND_WARRANTS_1
15. STOCK OPTIONS AND WARRANTS (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Stock Options [Member] | ' | ' |
Number of Options | ' | ' |
Number of Options Outstanding, Beginning | 1,218,206 | 176,667 |
Granted under Blast merger | ' | 12,973 |
Number of Options Granted | 104,500 | ' |
Rescission of granted options | 127,800 | 1,221,667 |
Number of Options Exercised | -39,000 | -190,333 |
Number of Options Forfeited/canceled | -6,782 | -2,768 |
Number of Options Outstanding, Ending | 1,404,724 | 1,218,206 |
Exercisable | 1,182,309 | 561,372 |
Weighted Average Exercise Price | ' | ' |
Weighted Average Exercise Price Outstanding, Beginning | $0.92 | $0.24 |
Weighted Average Exercise Price Granted under Blast merger | ' | $125.15 |
Weighted Average Exercise Price Granted | $3.75 | ' |
Weighted Average Exercise Price, Rescission of granted options | $0.48 | $0.49 |
Weighted Average Exercise Price Exercised | $0.28 | $0.46 |
Weighted Average Exercise Price Forfeited/canceled | $21.99 | $381.63 |
Weighted Average Exercise Price Outstanding, Ending | $0.80 | $0.92 |
Weighted Average Exercise Price Exercisable | $0.57 | $1.44 |
Weighted Average Remaining Contractual Life (in years) | ' | ' |
Weighted Average Remaining Contractual Life (in years) Outstanding, Beginning | '9 years 3 months 18 days | '9 years 9 months |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | '8 years 1 month 2 days | '9 years 3 months 18 days |
Weighted Average Remaining Contractual Life (in years) Exercisable | '8 years 4 months 10 days | '9 years 2 months 12 days |
Warrant [Member] | ' | ' |
Number of Options | ' | ' |
Number of Options Outstanding, Beginning | 633,631 | 193,334 |
Granted under Blast merger | ' | 68,736 |
Number of Options Granted | 2,452,408 | ' |
Rescission of granted options | ' | 479,195 |
Number of Options Exercised | -4,900 | -106,890 |
Number of Options Forfeited/canceled | -27,769 | -744 |
Number of Options Outstanding, Ending | 3,053,370 | 633,631 |
Exercisable | 3,053,370 | 633,631 |
Weighted Average Exercise Price | ' | ' |
Weighted Average Exercise Price Outstanding, Beginning | $18.25 | $1.89 |
Weighted Average Exercise Price Granted under Blast merger | ' | $141.81 |
Weighted Average Exercise Price Granted | $4.38 | $3.42 |
Weighted Average Exercise Price Exercised | $2.25 | $1.56 |
Weighted Average Exercise Price Forfeited/canceled | ' | $33.60 |
Weighted Average Exercise Price Outstanding, Ending | $4.12 | $18.25 |
Weighted Average Exercise Price Exercisable | $4.12 | $18.25 |
Weighted Average Remaining Contractual Life (in years) | ' | ' |
Weighted Average Remaining Contractual Life (in years) Outstanding, Beginning | '2 years 5 months 5 days | '4 years 15 days |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | '2 years 5 months 27 days | '2 years 5 months 5 days |
Weighted Average Remaining Contractual Life (in years) Exercisable | '2 years 5 months 27 days | '2 years 5 months 5 days |
15_STOCK_OPTIONS_AND_WARRANTS_2
15. STOCK OPTIONS AND WARRANTS (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Stock Option 1 [Member] | ' | ' |
Exercise Price | $0.24 | $0.30 |
Weighted Average Remaining Life (years) | '9 months 22 days | '0 years 9 months 29 days |
Options Outstanding | 146,667 | 80,000 |
Options Exercisable | 146,667 | 35,833 |
Stock Option 2 [Member] | ' | ' |
Exercise Price | $0.30 | $0.51 |
Weighted Average Remaining Life (years) | '4 months 2 days | '7 years 4 months 24 days |
Options Outstanding | 59,335 | 978,333 |
Options Exercisable | 50,500 | 411,666 |
Stock Options [Member] | ' | ' |
Exercise Price | $0.51 | $0.24 |
Weighted Average Remaining Life (years) | '6 years 6 months 29 days | '1 year 0 months 2 days |
Options Outstanding | 1,090,800 | 149,667 |
Options Exercisable | 981,720 | 103,667 |
Stock Option 3 [Member] | ' | ' |
Exercise Price | $3.75 | $30.24 |
Weighted Average Remaining Life (years) | '4 months 2 days | '0 years 0 months 7 days |
Options Outstanding | 104,500 | 5,953 |
Options Exercisable | ' | 5,953 |
Stock Option 4 [Member] | ' | ' |
Exercise Price | $30.24 | $33.60 |
Weighted Average Remaining Life (years) | '7 days | '0 years |
Options Outstanding | 2,976 | 2,247 |
Options Exercisable | 2,976 | 2,247 |
Stock Option 5 [Member] | ' | ' |
Exercise Price | $67.20 | $67.20 |
Weighted Average Remaining Life (years) | ' | '0 years |
Options Outstanding | 446 | 893 |
Options Exercisable | 446 | 893 |
Stock Option 6 [Member] | ' | ' |
Exercise Price | ' | $127.68 |
Weighted Average Remaining Life (years) | '8 years 1 month 2 days | '0 years |
Options Outstanding | 1,404,724 | 36 |
Options Exercisable | 1,182,309 | 36 |
Stock Option 6 [Member] | Minimum [Member] | ' | ' |
Exercise Price | $0.24 | ' |
Stock Option 6 [Member] | Maximum [Member] | ' | ' |
Exercise Price | $67.20 | ' |
Stock Option 7 [Member] | ' | ' |
Exercise Price | ' | $134.40 |
Weighted Average Remaining Life (years) | ' | '0 years |
Options Outstanding | ' | 298 |
Options Exercisable | ' | 298 |
Stock Option 8 [Member] | ' | ' |
Exercise Price | ' | $204.96 |
Weighted Average Remaining Life (years) | ' | '0 years |
Options Outstanding | ' | 36 |
Options Exercisable | ' | 36 |
Stock Option 9 [Member] | ' | ' |
Exercise Price | ' | $268.80 |
Weighted Average Remaining Life (years) | ' | '0 years |
Options Outstanding | ' | 743 |
Options Exercisable | ' | 733 |
Stock Option 10 [Member] | ' | ' |
Weighted Average Remaining Life (years) | ' | '9 years 3 months 25 days |
Options Outstanding | ' | 1,218,206 |
Options Exercisable | ' | 561,372 |
Stock Option 10 [Member] | Minimum [Member] | ' | ' |
Exercise Price | ' | $0.24 |
Stock Option 10 [Member] | Maximum [Member] | ' | ' |
Exercise Price | ' | $268.80 |
15_STOCK_OPTIONS_AND_WARRANTS_3
15. STOCK OPTIONS AND WARRANTS (Details 2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Warrant [Member] | ' | ' |
Warrants Exercise Price | $0.24 | $0.08 |
Warrants Weighted Average Remaining Life (years) | '0 years 5 months 15 days | '5 months 16 days |
Warrants Outstanding | 33,334 | 33,334 |
Warrants Exercisable | 33,334 | 33,334 |
Warrant 1 [Member] | ' | ' |
Warrants Exercise Price | $0.30 | $0.10 |
Warrants Weighted Average Remaining Life (years) | '9 years 3 months 26 days | '5 months 27 days |
Warrants Outstanding | 33,334 | 33,334 |
Warrants Exercisable | 33,334 | 33,334 |
Warrant 2 [Member] | ' | ' |
Warrants Exercise Price | $2.25 | $0.75 |
Warrants Weighted Average Remaining Life (years) | '0 years 9 months 0 days | '8 months 19 days |
Warrants Outstanding | 205,862 | 205,862 |
Warrants Exercisable | 205,862 | 205,862 |
Warrant 3[Member] | ' | ' |
Warrants Exercise Price | $2.34 | $1.12 |
Warrants Weighted Average Remaining Life (years) | '2 months 19 days | '0 years |
Warrants Outstanding | 166,684 | 4,882 |
Warrants Exercisable | 166,684 | 4,882 |
Warrant 4[Member] | ' | ' |
Warrants Exercise Price | $3.75 | $1.25 |
Warrants Weighted Average Remaining Life (years) | '0 years 4 months 21 days | '4 months 13 days |
Warrants Outstanding | 166,667 | 166,667 |
Warrants Exercisable | 166,667 | 166,667 |
Warrant 5[Member] | ' | ' |
Warrants Exercise Price | $4.50 | $1.50 |
Warrants Weighted Average Remaining Life (years) | '0 years 4 months 21 days | '4 months 13 days |
Warrants Outstanding | 166,667 | 166,667 |
Warrants Exercisable | 166,667 | 166,667 |
Warrant 6[Member] | ' | ' |
Warrants Exercise Price | $5.25 | $22.40 |
Warrants Weighted Average Remaining Life (years) | '8 months 19 days | '0 years |
Warrants Outstanding | 819,056 | 2,529 |
Warrants Exercisable | 819,056 | 2,529 |
Warrant 7[Member] | ' | ' |
Warrants Exercise Price | ' | $112 |
Warrants Weighted Average Remaining Life (years) | '2 years 5 months 27 days | '0 years |
Warrants Outstanding | 3,053,370 | 2,232 |
Warrants Exercisable | 3,053,370 | 2,232 |
Warrant 8 [Member] | ' | ' |
Warrants Exercise Price | ' | $161.28 |
Warrants Weighted Average Remaining Life (years) | ' | '7 days |
Warrants Outstanding | ' | 18,124 |
Warrants Exercisable | ' | 18,124 |
Warrant 9[Member] | ' | ' |
Warrants Weighted Average Remaining Life (years) | ' | '2 years 5 months 5 days |
Warrants Outstanding | ' | 633,631 |
Warrants Exercisable | ' | 633,631 |
Minimum [Member] | Warrant 7[Member] | ' | ' |
Warrants Exercise Price | $0.24 | ' |
Minimum [Member] | Warrant 9[Member] | ' | ' |
Warrants Exercise Price | ' | $0.08 |
Maximum [Member] | Warrant 7[Member] | ' | ' |
Warrants Exercise Price | $5.25 | ' |
Maximum [Member] | Warrant 9[Member] | ' | ' |
Warrants Exercise Price | ' | $161.28 |
15_STOCK_OPTIONS_AND_WARRANTS_4
15. STOCK OPTIONS AND WARRANTS (Details Narrative) (USD $) | Dec. 31, 2013 |
Warrant [Member] | ' |
Intrinsic value of outstanding options | $125,335 |
Intrinsic value of exercisable options | 125,335 |
Stock Options [Member] | ' |
Intrinsic value of outstanding options | 2,178,812 |
Intrinsic value of exercisable options | $1,983,579 |
16_RELATED_PARTY_TRANSACTIONS_
16. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes payable | $6,170,000 | ' |
Accrued interest | 585,777 | ' |
Note receivable | 1,252,393 | ' |
Condor | ' | ' |
Accrued interest | 188,469 | 16,963 |
Note receivable | 5,005,108 | ' |
Reduced note receivable and accrued interest | 5,193,577 | ' |
Net losses | 5,353,930 | ' |
Residual value | 160,353 | ' |
Cash advance | 3,001,875 | 2,434,442 |
Shares advance | 27,804 | 122,812 |
Series A Preferred Stock value | ' | 276,326 |
Repayments made to Company which were used to settle stock subscription receivable and accrued interest | 393,642 | ' |
Loans payable | ' | 2,711,992 |
Expenses related to a management services agreement | 75,131 | 81,124 |
Accrued management fees | $667,054 | $363,102 |
17_INCOME_TAXES_ALL_OPEN_Detai
17. INCOME TAXES [ALL OPEN] (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Noncurrent Deferred Tax Assets (Liabilities) | ' | ' |
Difference in depreciation, depletion, and capitalization methods b oil and natural gas properties | $562,342 | $18,845 |
Net operating losses | 4,131,374 | 1,761,066 |
Impairment b oil and natural gas properties | -1,122,953 | -61,289 |
Other | -33,885 | -43,809 |
Total noncurrent deferred tax asset | 3,536,878 | 1,674,813 |
Less valuation allowance | -3,536,878 | -1,674,813 |
Total deferred tax assets | ' | ' |
17_INCOME_TAXES_ALL_OPEN_Detai1
17. INCOME TAXES [ALL OPEN] (Details Narrative) (USD $) | 23 Months Ended |
Dec. 31, 2012 | |
Income Taxes All Open Details Narrative | ' |
Net change in valuation allowance | $1,947,749 |
Federal net operating loss carryforwards | $4,692,988 |
18_PRIROR_YEAR_RESTATEMENTS_De
18. PRIROR YEAR RESTATEMENTS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Accounts receivable - related party | $78,830 | $83,064 | [1] | ' |
Total assets | 25,800,605 | 11,146,724 | [1] | ' |
Series A convertible preferred stock | ' | 6,235 | [1] | ' |
Additional paid-in capital | 51,782,870 | 18,167,419 | [1] | ' |
Stock subscription receivable | -10,000,000 | -276,326 | [1] | ' |
Total stockholders equity | 10,886,840 | 5,127,824 | [1] | 888,553 |
Total liabilities and shareholders' equity | 25,800,606 | 11,146,724 | [1] | ' |
As Restated [Member] | ' | ' | ' | |
Accounts receivable - related party | ' | 3,062,390 | ' | |
Total assets | ' | 11,423,050 | ' | |
Series A convertible preferred stock | ' | 20,371 | ' | |
Additional paid-in capital | ' | 18,138,916 | ' | |
Stock subscription receivable | ' | ' | ' | |
Total stockholders equity | ' | -5,404,150 | ' | |
Total liabilities and shareholders' equity | ' | 11,423,050 | ' | |
As Reported [Member] | ' | ' | ' | |
Accounts receivable - related party | ' | 2,786,064 | ' | |
Total assets | ' | 11,146,724 | ' | |
Series A convertible preferred stock | ' | 18,704 | ' | |
Additional paid-in capital | ' | 18,140,583 | ' | |
Stock subscription receivable | ' | -276,326 | ' | |
Total stockholders equity | ' | -5,127,824 | ' | |
Total liabilities and shareholders' equity | ' | $11,146,724 | ' | |
[1] | Restated |