PETROSHARE CORP. (OTCMKTS:PRHR) Files An 8-K Entry into a Material Definitive AgreementItem 1.01 Entry Into a Material Definitive Agreement.
On January 30, 2017, PetroShare Corp. (the “Company”) completed the final closing of the private placement previously disclosed on its Forms 8-K filed with Securities and Exchange Commission (“SEC”) on January 5, 2017 and January 26, 2017 (the “Private Placement”). The Company entered into subscription agreements with 42 additional investors for the purchase of an additional 94.64 units. The Company received gross proceeds of $4,731,950 from the final closing, and gross proceeds of $10,000,000 from the entire Private Placement, before placement agent fees and other associated expenses.
Each unit is comprised of a 10% unsecured convertible promissory note in the face amount of $50,000 (the “Notes”) and 33,333 common stock purchase warrants (the “Warrants”). Each Note sold in the Private Placement is one of a series of similar Notes designated the “10% Unsecured Convertible Promissory Notes” with the series totaling $10,000,000. The Notes bear interest at the rate of 10% per year and are due and payable on December 31, 2018. Interest is payable semi-annually beginning June 30, 2017 and until the Notes are paid in full. At any time after issuance, the principal amount of the Notes and any accrued but unpaid interest are convertible into shares of the Company’s common stock at the option of the holder at the rate of $1.50 per share. Each Warrant allows the holder to purchase one share of the Company’s common stock at a price of $3.00 per share at any time on or before December 31, 2019.
In connection with the Private Placement, the Company paid GVC Capital LLC (“GVC”), as placement agent, and participating broker-dealers a total commission of $1,000,000 to a Placement Agent Agreement between the Company and GVC dated December 16, 2016 and amended on January 24, 2017. As additional compensation to GVC, the Company issued a placement agent warrant to purchase a total of 666,600 shares of the Company’s common stock exercisable at a price of $1.50 per share. The placement agent warrant expires on December 31, 2021. The parties also agreed to indemnify each other against certain liabilities in connection with the Private Placement.
The offer and sale of securities in the Private Placement were made to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (“Securities Act”) and Rule 506 thereunder. Such offers and sales were made solely to “accredited investors” as defined in Rule 501 under the Securities Act and were made without any form of general solicitation. All of the securities issued in the Private Placement, as well as the common stock which might be issued upon conversion of the Notes and exercise of the Warrants and the placement agent warrants, are restricted from resale in accordance with applicable securities laws.
The Company granted to the holders of the Notes, Warrants and placement agent warrant “piggyback” registration rights, to which under certain conditions, the Company has agreed to register the shares that might be issued upon conversion or exercise of these securities on any registration statement that the Company might file in the future with the SEC.
The foregoing does not purport to be a complete description of the Warrants, the placement agent warrant, the Notes, the Placement Agent Agreement, as amended, or the Subscription Agreements, and is qualified in its entirety by reference to the full text of such documents, which are attached as Exhibits 4.1, 4.2, 10.1, 10.2, and 10.3, respectively, to this Form 8-K.
