Item 3.02 Unregistered Sales of Equity Securities.
1. On January 27, 2021 Petroteq Energy Inc. ("Petroteq" or the "Company") issued a news release, as furnished to the United States Securities and Exchange Commission on January 28, 2021, announcing:
(a) A private placement of US$222,000 in principal amount of convertible debentures to certain offshore purchasers pursuant to Rule 903 of Regulation S ("Regulation S") under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), convertible into units of the Company at US$0.0562 per unit. Each unit consists of one common share and one common share purchase warrant, with each warrant being exercisable for one additional common share of the Company at US$0.0562 per share for 24 months;
(b) The issuance of finder's warrants exercisable for 276,512 common shares of the Company at US$0.10 per share for 24 months, issued pursuant to Rule 903 of Regulation S in connection with the offering described in paragraph 1(a);
(c) The closing of an equity financing of 7,416,666 common shares of the Company at US$0.06 per share for gross proceeds of US$445,000, whereby:
(i) two accredited investors purchased 1,416,666 shares pursuant to Rule 506(b) of Regulation D ("Regulation D") under the U.S. Securities Act; and
(ii) the balance of 6,000,000 shares were offered and sold to a single purchaser in an offshore transaction pursuant to Rule 903 of Regulation S; and
(d) The receipt by the Company of an irrevocable subscription from a subscriber for an additional 1,032,475 common shares of the Company at US$0.06 per share for gross proceeds of US$61,949, to be issued pursuant to Rule 903 of Regulation S, subject to receipt of the approval of the TSX Venture Exchange (the "Exchange"). As described in Item 8.01 below, the shares have now been issued following receipt of Exchange approval.
2. On March 5, 2021, a lender irrevocably elected to convert US$400,000 of principal under its amended convertible debenture. The 9,708,738 common shares issuable pursuant thereto qualifies for the registration exemption provided by section 3(a)(9) of the U.S. Securities Act.
3. On March 17, 2021, pursuant to a Debt Conversion Agreement dated as of that date, Petroteq issued:
(a) 581,026 common shares (the "Interest Conversion Shares") at a deemed issue price of US$0.39 per Interest Conversion Share, upon conversion of interest under certain convertible debentures that were originally scheduled to mature on, respectively, October 19, 2020 and December 17, 2020;
(b) 500,000 common share purchase warrants exercisable for US$0.0475 per share until October 19, 2021, as consideration for the amendment of the debenture originally due on October 19, 2020 and now extended to October 19, 2021; and
(c) 500,000 common share purchase warrants exercisable for US$0.0475 per share until December 17, 2021, as consideration for the amendment of the debenture originally due on December 17, 2020 and now extended to December 17, 2021.
The Interest Conversion Shares and common share purchase warrants were issued to the lender, an accredited investor, in reliance on Rule 506(b) of Regulation D. To the extent that the amendments to the debentures might be deemed to have involved the offer and sale of new replacement securities, the Company relied on section 3(a)(9) of the U.S. Securities Act.
4. The Company has received irrevocable subscription agreements for an aggregate of 2,166,665 common shares of Petroteq at a price of US$0.06 per share. Subscriptions for an aggregate of 1,999,999 common shares have been received from certain accredited investors pursuant to Rule 506(b) of Regulation D. Such subscriptions include a US$70,000 subscription from Mr. Alex Blyumkin, an officer and director of Petroteq, for 1,666,666 common shares. The subscription for the balance of 166,666 common shares has been received from an offshore institutional investor pursuant to Rule 903 of Regulation S. All 2,166,665 common shares were issued on April 28, 2021, following receipt of the approval of the Company's board of directors and the approval of the Exchange.
Such securities have been issued as "restricted securities" as defined in Rule 144 under the U.S. Securities Act. In addition, the securities are subject to a Canadian four-month hold period.
The proceeds of the foregoing unregistered share offerings will be used by the Company on its extraction technology in Asphalt Ridge, Utah, and for working capital.
The Company (with the lenders' consent) determined to satisfy the indebtedness in paragraphs 2 and 3(a) above with common shares in order to preserve the Company's cash for use on its extraction technology in Asphalt Ridge, Utah, and for working capital.
