ITEM 1.BUSINESS
Overview
Legend Oil and Gas, Ltd. (the “Company” or “Legend”) is a crude oil hauling and trucking company with principal operations in the Bakken region of North Dakota and the Permian Basin in Texas and New Mexico. These crude oil hauling operations commenced through our acquisition of Black Diamond Energy Holdings, LLC and its wholly-owned subsidiaries Maxxon Energy, LLC and Treeline Diesel Center, LLC (collectively, “Maxxon Energy” or “Maxxon”) on April 3, 2015. Our current focus is to grow our core business and expand our crude oil hauling operations into other basins throughout the United States. Our field operations are managed by employees in Texas, New Mexico and North Dakota. Our back office operations staff is based out of North Dakota and Colorado, with the Company’s combined Chief Executive Officer and Chief Financial Officer based out of Georgia, and our Controller based in Florida.
Further, through October 27, 2015, we were also an oil and gas exploration, development and production company; whose business was to acquire producing and non-producing oil and gas interests and develop oil and gas properties that we owned or in which we had a leasehold interest. Our oil and gas property interests were located in the United States (Kansas and Oklahoma). On October 27, 2015, we sold our oil and gas exploration operations and we have presented those operations as discontinued operations.
We are a publicly traded company and our shares of common stock (“common shares”) are quoted for trading on the Over-the-Counter Bulletin Board (“OTCBB”). We were incorporated under the laws of the State of Colorado on November 27, 2000 under the name “SIN Holdings, Inc.” On November 29, 2010, we changed our name to Legend Oil and Gas, Ltd. Our only subsidiary, effective April 3, 2015, is Black Diamond Energy Holdings, LLC, which is our crude oil hauling entity, further known as Black Diamond Energy, LLC (“Maxxon Energy” or “Maxxon”).
Background
Oil and Gas Properties Business
We previously held interests in oil and gas properties located in the United States (Kansas and Oklahoma). During the first quarter of 2015, we sold two properties in Kansas, leaving one producing oil and gas property in Kansas (Landers/Volunteer lease) which was sold on October 27, 2015, and one nonproducing oil and gas property in Oklahoma (Van Pelt lease) which had a carrying value of $-0- at December 31, 2015.
We sold the properties operated in Kansas to Hillair Petroleum Holdings, Inc (“HPH”), in exchange for debt forgiveness in the amount of approximately $1.9 million owed to Hillair Capital Investments L.P. (“Hillair”), with no gain recorded on the sale as HPH is a related party. See further discussion of the entire transaction within the Liquidity and Capital Resources section of ITEM 7.
Crude Hauling/Trucking Business- Purchase of Black Diamond Energy (Maxxon)
On April 3, 2015, the Company entered into a Membership Interest Purchase Agreement with Sher Trucking, LLC (“Sher”), the majority owner, and two minority owners, which made up all of the members of Maxxon to purchase all of the outstanding membership interests of Maxxon. The Company paid $1,500,000 in cash to Sher; issued a secured promissory note to Sher (“Sher Note”) in the amount of $2,854,000 at 5% per annum, due April 3, 2016 and issued 148,500,000 shares of the Company’s common stock to the minority owners, then valued at $861,300. The Company also paid $125,000 to Sher after closing as an anticipated purchase price adjustment related to the target working capital at April 3, 2015, of Maxxon.
On April 5, 2016, the Company entered into an agreement with Sher that restructured the original secured promissory note with a carrying balance of $2,854,000 plus accrued interest of $142,700 (the “Restructuring”), totaling $2,996,700 to Sher, with the Sher Note remaining collateralized on that date, by the same collateral as the original promissory note. At December 31, 2016, the note was uncollateralized as a result of the collateral oil trailers being sold at auction, with the proceeds being paid directly to Sher, as well as our payment against the restructured promissory note to Sher to release all liens on the collateral tractors. Refer to Note 10 - Long Term Debt in the accompanying consolidated financial statements.
Operations
Prior to the acquisition of Maxxon, we structured our operations in such a way as to mitigate certain operating expenses by maintaining a limited in-house employee base outside of our executive team. The majority of our operational duties were outsourced to consultants and independent contractors, including drilling, maintaining and operating our wells. Subsequent to the Maxxon acquisition, we terminated certain employees at Maxxon to effect operating efficiencies and reduce our operating costs.
Maxxon is our crude oil hauling and trucking subsidiary. We perform hauling services for large institutional drilling and exploration companies as well as crude oil marketers. The largest clients we served during 2016 included Statoil ASA, Inland Oil & Gas Corporation, HollyFrontier and Plains All American Pipeline, L.P.
Warren S. Binderman serves as our Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Principal Accounting Officer. Binderman also serves as a member of our Board of Directors and as its Corporate Secretary.
Markets for Crude Hauling Services
Our crude hauling business markets depend on many factors beyond our control, including the extent of domestic production and imports of crude oil, the proximity and capacity of crude oil and other transportation facilities, demand for crude oil, the marketing of competitive fuels and the effects of state and federal regulation. The crude oil industry also competes with other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.
Our crude oil hauling pricing structure is market driven, with customers principally controlling the rates they will pay per mile driven for hauling services from the well-head to the drop-off facility. Our rates are based on market conditions, which, based on the 2015 global decline in oil prices, with slight increases in 2016, required us to reduce our pricing markedly, to maintain and strengthen existing customers as well as acquire new customers.
Historically, the hauling rates we are able to charge to customers is based on the price of oil, which has fluctuated widely. Among the factors that can cause these fluctuations are:
●changes in global supply and demand for oil and natural gas;
●the actions of the Organization of Petroleum Exporting Countries, or OPEC;
●the price and quantity of imports of foreign oil and natural gas;
●acts of war or terrorism;
●political conditions and events, including embargoes, affecting oil-producing activity;
●the level of global oil and natural gas exploration and production activity;
●the level of global oil and natural gas inventories;
●weather conditions;
●technological advances affecting energy consumption; and
●the price and availability of alternative fuels.
We did not enter into any derivative commodity contracts in any of our operations.
Seasonality
Seasonality in the crude oil hauling sector differs by region. Regarding our current work in the Bakken, seasonality on hauling load counts may occur during “frost laws” (typically in the late February early March timeframe, annually). Counties have various roads mandated weight restrictions as the winter frost thaws roads. During these periods (an approximate six week timeframe), we are required to abide by County road restrictions on weight. Thus, we are able to haul lighter loads of crude oil while billing customers for full loads, per our agreements with those customers, translating into higher revenue due to the additional load counts carried and delivered.
Competition
Our crude oil hauling competition is significant, as larger haulers, integrated marketing companies and crude companies may have their own fleets of tractors and tankers for hauling purposes. Further, oil transported through pipelines impedes our ability to compete, as that as a more cost efficient alternative to truck hauling. However, there are many wells that are not on the pipeline, in addition to the fact that there are certain down periods of the pipeline where our customer base contacts us to service their well production.
Governmental Regulation
All of our operations are subject to various federal, state and local laws and regulations governing transportation (the US Department of Transportation and its affiliated agencies (DOT), prospecting, exploration, development, production, labor standards, occupational health and safety, control of toxic substances and emissions into the environment, storage and disposition of hazardous wastes and other matters involving environmental protection and employment. Environmental and DOT laws in the United States address the maintenance of air and water quality standards, the preservation of threatened and endangered species of wildlife and vegetation, the preservation of certain archaeological sites, reclamation, and limitations on the generation, transportation, storage, and disposal of solid and hazardous wastes, among other things. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuation of a given operation.
We do not believe that our environmental risks are or will be materially different from those of comparable companies in our industry. We believe our present activities substantially comply, in all material respects, with existing DOT, environmental, health and safety laws and regulations. However, our relative size compared to our competitors may make the impact of any environmental risk more significant to us than it would to our competitors. Compliance with DOT, environmental laws and our exposure to environmental risks could adversely affect our financial condition and results of operations, including by curtailment of production or material increases in the cost of insurance, fuel, personnel, or otherwise.
Laws and Regulations in the United States
The following is a summary of some of the material existing environmental, health and safety laws and regulations in the United States to which our business operations are subject.
Waste handling. The Resource Conservation and Recovery Act, or “RCRA”, and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the federal Environmental Protection Agency, or “EPA”, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced waters and most of the other wastes associated with the exploration, development and production of crude oil or natural gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain oil and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our costs to manage and dispose of wastes, which could have a material adverse effect on our results of operations and financial position.
Comprehensive Environmental Response, Compensation and Liability Act. The Comprehensive Environmental Response, Compensation and Liability Act, or “CERCLA”, also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, in connection with the release of a hazardous substance into the environment. Persons potentially liable under CERCLA include the current or former owner or operator of the site where the release occurred and anyone who disposed or arranged for the disposal of a hazardous substance to the site where the release occurred. Under CERCLA, such persons may be subject to joint and several liabilities for the costs of cleaning up the hazardous substances that have been released into the environment, damages to natural resources and the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.
We leased and operated numerous properties that have been used for oil and natural gas exploration and production for many years. Hazardous substances may have previously been released on, at or under the properties owned, leased or operated by us, or on, at or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of our properties have been or are operated by third parties or by previous owners or operators whose handling, treatment and disposal of hazardous substances were not under our control. These properties and the substances disposed or released on, at or under them may be subject to CERCLA, RCRA and analogous state laws. In certain circumstances, we could be responsible for the removal of previously disposed substances and wastes, to remediate contaminated property or to perform remedial plugging or pit closure operations to prevent future contamination. In addition, federal and state trustees can also seek substantial compensation for damages to natural resources resulting from spills or releases.
Water Discharges. The Federal Water Pollution Control Act, or the “Clean Water Act”, and analogous state laws, impose restrictions and strict controls with respect to the discharge of pollutants, including oil and other substances generated by our operations, into waters of the United States or state waters. Under these laws, the discharge of pollutants into regulated waters is prohibited except in accordance with the terms of a permit issued by EPA or an analogous state agency. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations.
The Safe Drinking Water Act, or “SDWA”, and analogous state laws impose requirements relating to underground injection activities. Under these laws, the EPA and state environmental agencies have adopted regulations relating to permitting, testing, monitoring, record keeping and reporting of injection well activities, as well as prohibitions against the migration of injected fluids into underground sources of drinking water.
Air Emission. The Federal Clean Air Act and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, EPA and certain states have developed and continue to develop stringent regulations governing emissions of toxic air pollutants at specified sources. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the Federal Clean Air Act and analogous state laws and regulations.
The Kyoto Protocol to the United Nations Framework Convention on Climate Change became effective in February 2005. Under the Protocol, participating nations are required to implement programs to reduce emissions of certain gases, generally referred to as greenhouse gases that are suspected of contributing to global warming. The United States is not currently a participant in the Protocol, and Congress has not acted upon recent proposed legislation directed at reducing greenhouse gas emissions. However, there has been support in various regions of the country for legislation that requires reductions in greenhouse gas emissions, and some states have already adopted legislation addressing greenhouse gas emissions from various sources, primarily power plants. The oil and natural gas industry is a direct source of certain greenhouse gas emissions, namely carbon dioxide and methane, and future restrictions on such emissions could impact our future operations.
Health Safety and Disclosure Regulation. We are subject to the requirements of the federal Occupational Safety and Health Act, or “OSHA” and comparable state statutes. The OSHA hazard communication standard, the Emergency Planning and Community Right to Know Act and similar state statutes require that we organize and disclose information about hazardous materials stored, used or produced in our operations.
Other Laws and Regulations. Various laws and regulations require certain permitting by the Department of Transportation, as to our crude oil hauling services. The effect of these laws and regulations, as well as other regulations that could be promulgated by the jurisdictions in which we provide hauling services, could be to limit the number of loads hauled due to various facts and circumstances in each of the local jurisdictions.
Employees
As of December 31, 2016, we had approximately 18 full-time employees working out of Texas and New Mexico, 13 in North Dakota, and 6 in Colorado. We have a corporate management team that includes one executive (the CEO and CFO) residing in Georgia and a corporate controller in Florida.
Principal Offices
Our principal offices are located at 555 North Point Center East, Suite 410, Alpharetta, Georgia 30022. Our lease is on a month-to-month basis of approximately $2,000 per month. We anticipate using our current space until it is no longer suitable for our operations or circumstances demand otherwise.
ITEM 1A.
ITEM 1A.RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this Report. Many of the statements contained in or incorporated herein that are not historic facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose a portion or all of your investment.
Risks Relating to Our Business
We are highly dependent on Warren S. Binderman, CEO and CFO. The loss of Mr. Binderman, upon whose knowledge, leadership and technical expertise we rely, could harm our ability to execute our business plan.
Our success depends heavily upon the continued contributions of Mr. Binderman, whose knowledge, leadership and technical expertise would be difficult to replace, and on our ability to retain and attract experienced professional staff. If we were to lose the services of Mr. Binderman, our ability to execute our business plan could be harmed and we may be forced to cease or limit operations until such time as we are able to attract suitable replacements. We do not maintain key person life insurance on these members of our management team.
We may be unable to obtain additional capital required to implement our business plan, which could restrict our ability to grow.
We will need additional capital to continue to grow our business via acquisitions and to further expand our crude oil hauling business. We may be unable to obtain additional capital if and when required.
Future acquisitions and future tractor and oil trailer purchases, and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of capital and cash flow.
We may pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means. We may not be successful in identifying suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, our resources will not be sufficient to fund our planned expansion of operations in the future.
Any additional capital raised through the sale of equity may dilute the ownership percentage of our stockholders. Raising any such capital could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities. In addition, we have granted and will continue to grant equity incentive awards under our equity incentive plans, which may have a further dilutive effect.
Our ability to obtain financing, if and when necessary, may be impaired by such factors as the state of the crude oil capital market, our limited operating history, the location of our crude oil hauling operations, and prices of crude oil on the commodities market (which will impact the amount of asset-based financing available to us), and the strength of our key employees. Further, if crude oil prices on the commodities markets decline, our revenues will likely decrease and such decreased revenues may increase our requirements for capital. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we may be required to cease or limit our operations, divest our assets at unattractive prices or obtain financing on unattractive terms.
We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, which may adversely impact our financial condition.
We have a limited operating history, and may not be successful in achieving or sustaining profitable business operations.
We have a limited operating history and have not generated a sustained profit. Our business operations must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in the crude oil industry. We first generated revenues from operations in the quarter ended December 31, 2010. There can be no assurance that our business operations will prove to be successful in the long-term. Our future operating results will depend on many factors, including:
●our ability to raise adequate working capital;
●success of our crude oil hauling and marketing efforts;
●demand for and pricing of crude oil;
●the level of our competition;
●our ability to attract and maintain key management and employees; and
●our ability to efficiently develop our crude oil hauling activities in a highly competitive market, with the global oil price downturn while maintaining quality and controlling costs.
To achieve and sustain profitability in the future, we must, alone or with others, successfully manage the factors stated above, as well as continue to develop ways to enhance our crude oil hauling marketing efforts to diversify our customer base. Despite our best efforts, we may not be successful in our efforts. Our failure to successfully address the obstacles that may arise, including those discussed above, could have a material adverse effect on our business.
Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations.
Our ability to successfully acquire additional customers, to increase our crude oil hauling, and to identify and enter into commercial arrangements with customers will depend on developing and maintaining close working relationships with strategic partners, vendors, distributors and other industry participants. To continue to develop our business, we will endeavor to use the business relationships of our management to enter into strategic relationships, which may take the form of joint ventures or contractual arrangements with other similar companies, including those that supply property and equipment and services, and other resources which we may use in our business. We may not be able to establish these strategic relationships, or if established, we may not be able to adequately maintain them. In addition, the dynamics of our relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to in order to fulfill our obligations to these partners or maintain relationships. If our strategic relationships are not established or maintained, our business, prospects, financial condition and results of operations may be materially adversely affected.
The oil market may significantly impact our business and financial condition for the foreseeable future.
The crude oil hauling operations are inextricably linked to the oil markets, and may adversely impact our business and our financial condition, and we may face challenges if conditions in these markets do not improve. Our ability to access the capital markets may be restricted at a time when we would like, or need, to raise financing, which could have a material negative impact on our flexibility to react to changing economic and business conditions. The economic situation could have a material negative impact on our lenders or customers, causing them to fail to meet their obligations to us. Additional capital will be required in the event that we accelerate customer acquisition program or that crude oil prices decline further, resulting in significantly lower revenues.
We may be prevented from conducting our business if we cannot obtain or maintain necessary licenses.
Our operations require licenses, permits and in some cases renewals of licenses and permits from various governmental authorities. Our ability to obtain, sustain or renew such licenses and permits on acceptable terms is subject to changes in regulations and policies and to the discretion of the applicable governments, among other factors. Our inability to obtain, or the loss of or denial of extension of, any of these licenses or permits could hamper or prevent us from operating our business.
The report of our independent registered public accounting firm expressed substantial doubt about the Company’s ability to continue as a going concern.
Our auditors, Marcum, LLP in 2016 and GBH CPAs, P.C. in 2015, indicated in their reports on the Company’s consolidated audited financial statements for the years ended December 31, 2016 and 2015, that conditions existed that raise substantial doubt about our ability to continue as a going concern due to the Company’s recurring losses from operations and net working capital deficit at both December 31, 2016 and 2015. Uncertainties related to our continuation as a going concern may impair our ability to finance our operations through the sale of equity, incurring debt, or other financing alternatives and/or negatively affect our relationships with partners and service providers. Our ability to continue as a going concern will depend upon the availability and terms of future funding, our ability to grow our operations and integrate newly acquired assets and operations, our ability to acquire additional assets and operations, and our ability to improve operating margins and regain profitability. If we are unable to achieve these goals, our business would be jeopardized and the Company may not be able to continue. If we ceased operations, it is likely that all of our investors would lose their investment.
Risks Related to Our Industry
Environmental risks may adversely affect our business.
All facets of the oil industry presents environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, state, provincial and municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can require significant expenditures, and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner that we expect may result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of oil, natural gas or other pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharge. Compliance with environmental laws applicable to our business may cause us to curtail our future production or increase the costs of our production, development or exploration activities. If substantial enough, the costs could cause us to cease operations.
Government regulations and legal uncertainties could affect our ability to profitably grow our customer base.
Legislative and regulatory actions by governments may lead to changes in laws or regulations that negatively affect various aspects of the crude oil hauling business. The adoption of new laws or regulations, or the application of existing laws may decrease the growth in the demand or alter the cost of and demand for our hauling services or increase our costs of doing business. Any of these restrictions could have a material adverse effect on our financial position and results of operations.
Companies operating in the oil and gas industry are subject to substantial competition.
The oil and gas industry is highly competitive. Other crude oil haulers may seek to acquire customers at pricing and cost models that are lower than ours. This competition is increasingly intense as prices of oil have decreased globally. Additionally, other companies engaged in our line of business may compete with us in obtaining capital from investors. Competitors include larger companies that may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own crude oil hauling operations, which may give them a competitive advantage in the industry. If we are unable to compete effectively or respond adequately to competitive pressures, our results of operation and financial condition may be materially adversely affected.
The domestic prices at which oil and natural gas trade in the open market have experienced significant volatility, which can significantly negatively impact our crude oil hauling business and revenues.
The prices we may charge our customers may heavily influence our revenue, profitability, access to capital and future rate of growth. In recent years, the domestic prices at which oil and natural gas trade in the open market have experienced significant volatility, and we believe will likely continue to fluctuate in the foreseeable future due to a variety of influences beyond our reasonable control, including without limitation the following:
●the price and quantity of imports of foreign oil and gas;
●political and economic conditions, including embargoes, in oil-producing countries or affecting other oil-producing activity;
●the level of global and domestic oil and gas exploration and production activity and inventories;
●technological advances affecting the level of oil and gas consumption;
●domestic and foreign governmental regulations;
●proximity and capacity of oil and gas pipelines and other transportation facilities;
●the price and availability of competitors’ supplies of oil and gas in captive market areas;
●the introduction, price and availability of alternative forms of fuel to replace or compete with oil and natural gas;
●domestic and foreign demand for oil and natural gas by both refineries and end users;
●competitive measures implemented by competitors in the oil and gas industry;
●political climates in nations that traditionally produce and export significant quantities of oil and natural gas and regulations and tariffs imposed by exporting and importing nations, including actions taken by the Organization of Petroleum Exporting Countries; and
●adverse weather conditions, including freezing temperatures and severe storms.
Risks Associated with Our Securities
Our Board of Directors’ ability to issue undesignated preferred shares and the existence of anti-takeover provisions may depress the value of our common shares.
Our authorized capital includes 100,000,000 preferred shares, all of which are blank check preferred shares available for issuance. Our Board of Directors has the power to issue any or all of the preferred shares, including the authority to establish one or more series and to fix the powers, preferences, rights and limitations of such class or series, without stockholder approval. Our Board may, in the future, consider adopting additional anti-takeover measures. The authority of our Board to issue undesignated stock and the anti-takeover provisions of Colorado law, as well as any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of us that are not approved by our Board. As a result, our stockholders may lose opportunities to dispose of their common shares at favorable prices generally available in takeover attempts or that may be available under a merger proposal and the market price, voting and other rights of the holders of common shares may also be affected.
Our common shares are quoted on the Over-the-Counter Bulletin Board, which may have an unfavorable impact on our stock price and liquidity.
Our common shares are quoted on the Over-the-Counter Bulletin Board (the “OTCBB”). The OTCBB is a significantly more limited market than the New York Stock Exchange, the American Stock Exchange or NASDAQ system. The OTCBB market is an inter-dealer market much less regulated than the major exchanges and the common shares are subject to abuses, volatility and shorting. There is currently no broadly followed and established trading market for our common shares. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the level of liquidity available to the holders of our common shares.
It may not be possible for a stockholder to sell their common shares within any particular time period, for an acceptable price, or at all. There is no certainty that a holder of common shares will be able to identify a buyer for common shares or realize any monetary value whatsoever from a sale thereof.
Our common shares are considered highly speculative and there is no certainty that common shares will continue to be quoted for trading on the OTCBB or on any other form of quotation system or stock exchange, and even if the common shares were to be listed on a quotation system or stock exchange senior to the OTCBB, the common shares would continue to be subject to the resale restrictions and other limitations described above.
Our common shares are thinly traded, so you may be unable to sell at or near asking prices or at all.
Currently, our common shares are quoted in the OTCBB and the trading volume in our common shares may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in OTCBB stocks and certain major brokerage firms restrict their brokers from recommending OTCBB stocks because they are considered speculative, volatile and thinly traded. The market price of our common shares could fluctuate substantially due to a variety of factors, including market perception of its ability to achieve its planned growth, quarterly operating results of other companies in the same industry, trading volume in the common shares, changes in general conditions in the economy and the financial markets or other developments affecting us or our competitors. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common shares.
The trading volume of our common shares has been and may continue to be limited and sporadic. As a result of such trading activity, the quoted price for our common shares on the OTCBB may not necessarily be a reliable indicator of its fair market value. When fewer shares of a security are being traded on the OTCBB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in the common shares, there may be a lower likelihood of one’s orders for common shares being executed, and current prices may differ significantly from the price one was quoted at the time of one’s order entry.
Further, if our common shares cease to be quoted, holders would find it more difficult to dispose of their common shares or to obtain accurate quotations as to the market value of the common shares and as a result, the market value of the common shares likely would decline.
Our common shares may not become listed or quoted on a stock market senior to the OTCBB.
In the future, we may seek to apply for listing on another market or exchange within the United States, such as Nasdaq or the New York Stock Exchange. We currently do not meet all of the initial listing standards for any of these exchanges, particularly the corporate governance requirements and director independence. There are no assurances that we will satisfy the applicable listing standards of any such market that we apply to, or that we will be able to obtain or maintain a more senior listing for our common shares.
We are subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to its customers prior to executing trades in penny stocks. These disclosure requirements may make it difficult for our stockholders to sell their shares.
Our common shares are subject to the SEC regulations for “penny stock.” Penny stock includes any non-NASDAQ or other exchange listed equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule set forth by the SEC relating to the penny stock market must be delivered to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for the common stock. The regulations also require that monthly statements be sent to holders of penny stock which disclose recent price information for the penny stock and information of the limited market for penny stocks. These requirements adversely affect the market liquidity of our common stock.
In addition, our common stock is subject to Rule 15g-1 through 15g-9 under the Exchange Act, which imposes certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 (exclusive of the value of their primary residence) or annual incomes exceeding $200,000 individually, or $300,000 together with their spouse)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common stock and purchasers of our common stock to sell their shares of such common stock.
If we raise capital through the sale of equity securities, existing stockholders will be diluted.
Any additional capital we raise through the sale of our equity securities will dilute the ownership percentage of our stockholders. Raising any such capital could also result in a decrease in the nominal fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities that we issue in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee incentive plans, all of which may have a dilutive effect to existing investors.
The elimination of monetary liability against our directors, officers and employees under Colorado law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees.
Our organizational documents contain provisions that limit the liability of our directors for monetary damages and provide for indemnification of our executive officers and directors. These provisions may discourage stockholders from bringing a lawsuit against our officers and directors for breaches of fiduciary duty and may also reduce the likelihood of derivative litigation against its officers and directors even though such action, if successful, might otherwise have benefited the stockholders. We may also have contractual indemnification obligations under our agreements with our officers. In addition, to the extent that costs of settlement and damage awards against our officers or directors are paid by us pursuant to the indemnification provisions in our governing documents, this actually may have the effect of deterring the stockholder from bringing suit against our officers or directors. We have been advised that the SEC takes the position that these types of indemnification provisions are unenforceable under applicable federal and state securities laws. However, management has obtained Directors and Officers liability insurance coverage to mitigate exposure should any events occur.
Restricted securities may not be resold outside of a registered offer and sale.
Securities that we sell and issue and that have not been registered under the Securities Act are “restricted securities” within the meaning of Rule 144. As a result, such restricted securities may not be offered, sold, pledged or otherwise transferred by the holders of such shares, directly or indirectly, unless the shares are registered under the Act and all applicable states securities laws, or unless there is an available exemption or exclusion from such registration requirements.
Unless certain conditions are met, Rule 144 is not available for the resale of securities of issuers that are, or have ever previously been, issuers with (i) no or nominal operations and (ii) no or nominal assets other than cash and cash equivalents (a “shell company”). The Asset Purchase Agreement with Wi2Wi concluded that we may have been at one time a “shell company” in the past. We believe that we were never a shell company and that, even if we were deemed to have been a shell, we ceased to be a shell company in October 2010, when we acquired our first oil and gas producing properties, and that the filing of our Annual Report on Form 10-K for the year ended December 31, 2010 satisfied the Form 10 disclosure requirements. However, if it is deemed that we did not satisfy the conditions for use of Rule 144, our stockholders would not be able to use Rule 144 for resales of restricted securities.
ITEM 1B.
ITEM 1B.UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2.OIL AND GAS PROPERTIES
We previously held interests in oil and gas properties located in the United States (Kansas and Oklahoma). During the first quarter of 2015, we sold two properties in Kansas, leaving one producing oil and gas property in Kansas (Landers/Volunteer lease) which was sold on October 27, 2015, and one nonproducing oil and gas property in Oklahoma (Van Pelt lease) which was impaired to $ -0- at December 31, 2015, and is a nonproducing property. Further, we have accrued the appropriate asset retirement obligations as a liability in our consolidated financial statements at December 31, 2016 and 2015, related to this specific lease.
We sold the lease operated in Kansas to HPH, in exchange for debt forgiveness in the amount of approximately $1.9 million owed to Hillair, with no gain or loss recorded on the sale as HPH is a related party.
Summary of Oil and Gas Reserves as of December 31,
On October 27, 2015, we sold the remaining productive oil and gas property that the Company owned and at that date, became solely a trucking hauler of crude oil in the Bakken region of North Dakota. During the year ended December 31, 2016, we also commenced operations in the Permian basin of Texas and New Mexico, while maintaining our operations in North Dakota.
See “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” for more information about our production from our oil and gas properties.
ITEM 3.
ITEM 3.LEGAL PROCEEDINGS
As of the date of this Report, there are no other claims, proceedings, actions or lawsuits in existence, or to our knowledge threatened or asserted claims, against us or with respect to any of our assets that would materially adversely affect our business, property or financial condition, including environmental actions or claims. In addition, there are no outstanding judgments against us or any consent decrees or injunctions to which we are subject or by which our assets are bound. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
We do not know of any proceedings to which any of our directors, executive officers, or affiliates, any owner of record of the beneficially or more than five percent of its common stock, or any associate of any such director, officer, affiliate, or security holder is a party adverse or has a material interest adverse to us.
ITEM 4.
Item 4 entitled Limitations on the Effectiveness of Internal Controls).
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d - 15(f) under the Securities Exchange Act of 1934. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that our receipts and expenditures are made in accordance with management authorization; and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting, however well designed and operated can provide only reasonable, and not absolute, assurance that the controls will prevent or detect misstatements. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.
Management, under the supervision and with the participation of the individual serving as our Chief Executive Officer and our Chief Financial Officer conducted an evaluation of our internal control over financial reporting as of December 31, 2016, based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the COSO framework, management concluded that our internal control over financial reporting was not effective as of December 31, 2016, due to the material weaknesses set forth below.
a) Due to the small size of the Company, there are inadequate segregation of duties consistent with control objectives affecting authorization, recordkeeping and reconciliations. Due to the small size of the accounting department, consisting of the Chief Financial Officer and Controller, there are limited compensating controls around segregation of duties.
b) The Company currently does not have sufficient personnel with the appropriate level of accounting knowledge, experience and training in the selection, application and implementation of generally acceptable accounting principles as it relates to complex transactions, fair value measurements and financial reporting requirements.
c) Lack of controls that provide reasonable assurance regarding prevention or timely detection of unauthorized expense reimbursement that could have a material effect on the financial statements.
Management is in the process of remediating these weaknesses and is continuing to expand the accounting department.
Changes in Internal Control Over Financial Reporting
On November 29, 2016, Andrew Reckles resigned as Chief Executive Officer, Chairman of the Board of Directors and a member of the Board of Directors of the Company. On November 29, 2016, Warren S. Binderman, President and Chief Financial Officer of the Company, was appointed to the additional role of Chief Executive Officer.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal controls over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our President and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Attestation Report of the Registered Public Accounting Firm
This Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Additionally, management’s report was not subject to attestation by our registered public accounting firm pursuant to the permanent exemption from Section 404(b) of the Sarbanes-Oxley Act of 2002 for non-accelerated filers.
ITEM 9B. OTHER INFORMATION
See “BUSINESS - Recent Developments” in Item 1 of this Report.
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 1A RISK FACTORS
No material changes.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 MINE SAFETY DISCLOSURES
None.
ITEM 5
ITEM 5 OTHER INFORMATION
None.
ITEM 6
ITEM 6 EXHIBITS
The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report.
Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
● may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;
● may apply standards of materiality that differ from those of a reasonable investor; and
● were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
As of the date of this report’s release, our Board of Directors consists of four members, one of which is an executive officer. The term of office of each director expires at the next annual meeting of our stockholders. Directors serve until their respective successors have been elected and qualified. Executive officers are appointed by and serve at the pleasure of the Board of Directors.
Set forth below is biographical information for each of our current directors.
Warren S. Binderman
Warren is the Chief Executive Officer, and Chief Financial Officer of Legend. He previously served as the Chief Financial Officer since July 2014. He also serves on the Company’s Board and is the Corporate Secretary. He is also the managing member of the Binderman Group, LLC, a specialized accounting and business consulting firm performing services throughout the United States. Warren excels in servicing and communicating with clients as they move through the transaction process-from IPO, private equity deals, mergers and acquisitions, public shell transactions and reverse mergers, and other such ownership transitions. He is a skilled business partner who listens and is committed to helping Clients achieve their goals, ensuring that the transactions being considered are properly supported and meet the appropriate financial and strategic objectives. With deep knowledge and experience across industries, he works with clients to ensure that money makes sense for their business and life. Warren’s expertise includes investment due diligence, mergers and acquisitions, private placement reviews, and restructuring services. He has demonstrated experience in various industry sectors and has worked with many publicly held companies, financial institutions, and closely held companies. Due to his experience working with public and private sector entities, he has an excellent depth of knowledge in both sectors’ activities and transactions. Warren also has significant depth performing due diligence, consulting services, and audits of entities with complex structures. Before working with Legend and starting the Binderman Group, Warren served in various capacities with International accounting firms in the capacities of partner, director, manager and staff. He worked for Arthur Andersen LLP for nine years and KPMG LLP for over three years, as well as other national and international firms throughout his career. Warren received his Bachelor of Business Administration degree from the University of Maryland in 1990 and was a Magna Cum Laude graduate of The Smith Business School, with a major in Accounting. He is a member of the AICPA, and is a CPA in Georgia, and Maryland.
Unless otherwise stated above, none of our directors or executive officers is a director of any other public company, nor are they related to any officer, director or affiliate of the Company. Additionally, none of our directors or executive officers is a party to any pending legal proceeding, is subject to a bankruptcy petition filed against them or have been convicted in, or is subject to, any criminal proceeding.
Alais Griffin
On March 7, 2016, Alais Griffin, age 43, joined the Company’s Board of Directors. Ms. Griffin currently serves as the General Counsel of a large, national nonprofit organization. As the organization’s chief legal officer, she oversees all legal issues concerning the entity’s operations.
Prior to joining the nonprofit world, Ms. Griffin was a partner in the Chicago office of an international law firm, where she focused her practice on litigation, compliance and internal investigations, with an emphasis on transportation. As a former senior political appointee in the United States Department of Transportation (DOT), Ms. Griffin brought extensive experience in transportation-related enforcement matters and litigation, as well as unique insights into DOT regulatory compliance, regulatory development and other government processes. She represented clients in a wide variety of enforcement, compliance and financing matters before almost every DOT agency. She also served as a Steering Committee Member of the American Bar Association’s Section of International Law, International Transportation Committee and was elected Vice-Chair before leaving private practice.
Ms. Griffin’s experience also includes assisting with the development and implementation of internal compliance initiatives for multinational companies subject to the Foreign Corrupt Practices Act (FCPA) and other bribery acts, including those in Sub-Saharan Africa. She has spoken both in the United States and abroad on compliance related-topics, including the FCPA and transportation regulations, and has been published widely on regulatory and compliance matters.
From 2009 to 2012, Ms. Griffin served as the Counselor to the DOT General Counsel, where she worked closely with the General Counsel, the Office of the Secretary and other senior political appointees on the Department’s regulatory, policy and litigation matters. She subsequently served as the Chief Counsel for the Federal Motor Carrier Safety Administration, the DOT agency that oversees commercial motor vehicles. As the Agency’s chief legal officer, Ms. Griffin managed FMCSA’s litigation matters as well as the legal and strategic review of Agency policies, programs and regulations. In her capacity as a senior advisor, Alais also worked regularly on legislative and regulatory matters with the White House, other Executive Branch agencies and Congress.
Ms. Griffin received a Bachelor of Arts degree, cum laude general studies, from Harvard University and a JD, cum laude, from Northwestern Pritzker School of Law, where she was Executive Editor of the Northwestern University Law Review and a member of the Order of the Coif. In 2013, she received the “Outstanding 50 Asian Americans in Business Award” from the Asian American Business Development Center.
Jeffrey Kaplin
Jeff has lived in Atlanta, GA since 1987. Jeff graduated from Indiana University in Bloomington, Indiana in May 1987 with a Bachelor of Science with a major in Accounting. He has practiced public accounting for over 20 years and is the managing partner of the public accounting firm, Rosenthal & Kaplin, P.C., which is a member firm of the AICPA. He is a financial expert in the areas of taxation (corporate, individual and partnership), and as a CPA, practices auditing and attestation services. Other areas relative to Jeff’s expertise include IRS representation, litigation support, and merger and acquisition services. Jeff is currently serving on the B’nai Torah Board of Trustees, The Standard Country Club Board of Governors and is a former Epstein School Trustee. He is an active CPA in Georgia, and is a member of the American Institute of Certified Public Accountants (AICPA) and the Georgia Society of Certified Public Accountants (GSCPA).
Neal Kaufman
Neal is a founding member of Hillair Capital, our majority stockholder. He has over fifteen years of operating experience with large and small publicly traded companies and also has significant experience supporting financing activities. Neal opened the West Coast operations for Ardour Capital Investments, LLC, an investment bank wholly focused on the clean technology sector and prior to that, served as the Chief Executive Officer of TieTek. Neal held various senior management positions at 3Com Corporation, and also worked for the Internet arm of NBC Television. He began his career at McKinsey & Co., working in the U.S., Europe and South America. Neal has an AB in economics magna cum laude from Harvard College, a MA from Stanford University and a MBA from Harvard Business School where he was a Baker Scholar. Mr. Kaufman’s pertinent experience, qualifications, attributes, and skills include expertise in finance, strategy, and operations.
Sean McAvoy
Sean M. McAvoy was appointed as a director of the Company as of January 1, 2017. Sean is a founding member, since 2010, of Hillair Capital Management LLC and its affiliated funds. He has over twenty years of experience in structuring and negotiating transactions primarily in the public markets. Between 1996 and 2008, Sean was a member of the mergers and acquisitions, private equity and corporate finance practices at Jones Day, an international law firm, where he served as a founding partner of the firm’s Silicon Valley office from 2002 to 2008. At Jones Day, Sean represented public companies and their boards of directors, as well as financial sponsors, in domestic and cross-border mergers and acquisitions, auctioned dispositions, unsolicited and negotiated tender offers, leveraged buyouts, including going-private transactions, and leveraged recapitalizations. Sean also counseled boards of directors and senior management regarding corporate governance, fiduciary duty and takeover preparedness as well as disclosure obligations. Prior to his corporate legal career, Sean served as a Legislative Aide to Senator William S. Cohen and as a Professional Staff Member of the United States Senate Governmental Affairs Committee. Sean also served as a Special Counsel and senior staff member on Senator John McCain’s 2008 presidential campaign. Currently, Sean serves on the boards of SG Blocks, Inc., the premier innovator and designer of container-based structures, and The Orvis Company, Inc., a specialty retailer and sporting goods company and also on the board of The Pacific Research Institute, a California-based free-market think tank. Sean is an honors graduate of Williams College and earned advanced degrees at the London School of Economics and Political Science, where he was an AFLSE Scholar, and Georgetown University Law School, where he was a member of the Georgetown Journal of International Law.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than 10% of our common stock (collectively, “Reporting Persons”) to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock. Reporting Persons are also required by SEC regulations to furnish us with copies of all such ownership reports they file. SEC regulations also require us to identify in this Report any Reporting Person who failed to file any such report on a timely basis.
We believe that all Reporting Persons complied with all applicable Section 16(a) filing requirements for fiscal year 2015, based solely on our review of the copies of such reports received or written communications from certain Reporting Persons.
Code of Ethics
We have a Code of Ethics that applies to our three key executives and directors. A copy of the Code of Ethics is included as Exhibit 14.1 to this Report and is available on our corporate website at www.midconoil.com in the section “About Legend.”
Audit Committee
During 2015, Jeffrey Kaplin, CPA was appointed to our Board. He was appointed the sole, independent member of the committee, serving as our “financial expert” to serve as the Chair of the audit committee.
On November 25, 2016, Neal Kaufman, age 48, joined the Company’s Board of Directors. Neal is a founding member of Hillair, our majority stockholder.
On November 29, 2016, Alais Griffin, an outside director of the Company, assumed the role of interim Board Chair.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The table below shows all compensation awarded, earned by or paid to Mssrs. Andrew Reckles, Former Chairman of the Board and CEO, Marshall Diamond-Goldberg, Former President and COO, Warren S. Binderman, President, CEO, CFO, and Secretary/Treasurer, James Vandeberg, former CFO and Secretary and Kyle Severson, former Chief Financial Officer (our “NEOs”) for each of the fiscal years ended December 31, 2016, 2015 and 2014:
Compensation Philosophy and Objectives
Our executive compensation program that we apply to our NEOs will be designed to attract and retain qualified and experienced executives who will contribute to our success. The executive compensation program is designed to attract, motivate and retain individuals with the skills and qualities necessary to support and develop our business within the framework of our small size and available resources. The Board of Directors has sole and unfettered discretion with respect to decisions regarding the compensation of the NEOs.
Elements of Compensation
Our executive compensation program is anticipated to consist of two components: (i) base compensation, and (ii) a long-term compensation component in the form of stock options and stock awards. Both components are determined and administered by the Board of Directors. The stock incentive component is expected to form an essential part of the NEOs’ compensation.
Base Compensation
Base compensation for the NEOs is reviewed from time to time and set by the Board of Directors, and is based on the individual’s job responsibilities, contribution, experience and proven or expected performance, as well as to market conditions. In setting base compensation levels, consideration will be given to such factors as level of responsibility, experience and expertise. Subjective factors such as leadership, commitment and attitude will also be considered.
Stock Options and Awards
To provide a long-term component to the executive compensation program, our executive officers, directors, employees and consultants may be granted Options and Awards (as those terms are defined below) under our 2011 Stock Incentive Plan and 2013 Stock Incentive Plan. The maximization of stockholder value is encouraged by granting equity incentive awards. The President will make recommendations to the Board of Directors for the other executive officers and key employees. These recommendations take into account factors such as equity compensation given in previous years, the number of Options and Awards outstanding per individual and the level of responsibility.
Narrative Disclosure to Summary Compensation Table
Outstanding Equity Awards at 2016 Fiscal Year-End
There are no outstanding equity awards at December 31, 2016.
Director Compensation
We paid and/or accrued a monthly fee of $500 per month to Mr. Kaplin during his period as Director during 2015. In 2016, both outside directors, Ms. Griffin and Mr. Kaplin, are paid a monthly board fee of $2,000.
2016 Stock Incentive Plan
On October 26, 2016, our Board of Directors approved the Legend Oil and Gas, Ltd. 2016 Stock Incentive Plan (“Plan”). The Plan has not been formalized at this time, as we have not filed a Form S-8. This Plan provides for the grant of options (“Options”) to purchase common shares, and stock awards (“Awards”) consisting of common shares, to eligible participants, executive officers, and employees. The terms and conditions of the 2016 Plan apply equally to all participants. We reserved a total of 250,000,000 shares of common stock for issuance under the Plan. Further, the Board and the majority stockholders cancelled all prior Stock Incentive Plans, including the 2014 and 2014 Plans depicted below.
On September 30, 2013, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2013 Stock Incentive plan. The Plan provides for the grant of options to purchase shares of our common stock, and stock awards consisting of shares of our common stock, to eligible participants, including directors, executive officers, employees, and consultants of the Company. We have reserved 10,000,000 shares of common stock for issuance under the Plan and have issued 750,000 shares to Mr. Vandeberg.
The Plan Administrator, which is currently the Board of Directors, may designate which of our directors, officers, employees and consultants are to be granted Options and Awards. The Plan Administrator has the authority, in its sole discretion, to determine the type or types of awards to be granted under the Plan. Awards may be granted singly or in combination.
Potential Payments upon Resignation, Retirement, or Change of Control
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The tables below set forth information with respect to the beneficial ownership of our common shares as of March 31, 2017 by our directors, named executive officers, and directors and executive officers as a group, as well as each person (or group of affiliated persons) who is known by us to beneficially own 5% or more of our common shares. As of the latest practical date before filing this annual report, there were 942,083,273 common shares issued and outstanding.
The percentages of common shares beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. To our knowledge, unless indicated in the footnotes to the table, each beneficial owner named in the tables below has sole voting and sole investment power with respect to all shares beneficially owned.
(1) The information for such stockholders are based on the list of record holders maintained by our stock transfer agent. Such stockholder has not filed a Schedule 13D with the SEC disclosing its greater than five percent ownership.
Securities Authorized for Issuance Under Equity Compensation Plans
On September 5, 2014, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2014 Stock Incentive Plan, included in the Form S-8 filed on that date. This Stock Incentive Plan provides for the grant of options (“Options”) to purchase common shares, and stock awards (“Awards”) consisting of common shares, to eligible participants, including our directors, executive officers, employees and consultants. The terms and conditions of the 2014 Stock Incentive Plan apply equally to all participants. We reserved a total of 65,000,000 common shares for issuance under the Plan. No shares or stock options have been issued under this Plan as of this date. This Plan has been cancelled by the Board of Directors.
On October 17, 2013, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2013 Stock Incentive Plan. We reserved a total of 10,000,000 common shares for issuance under the Plan. This Plan has not been approved by stockholders. There are currently no options outstanding under the 2013 Stock Incentive Plan, and a grant for 750,000 common shares was issued on October 17, 2014. This Plan has been cancelled by the Board of Directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Party Transactions
Except as set forth below, we are not aware of any material interest, direct or indirect, of any of our directors or executive officers, any person beneficially owning, directly or indirectly, 10% or more of our voting securities, or any associate or affiliate of such person in any transaction since the beginning of the last fiscal year or in any proposed transaction which in either case has materially affected or will materially affect us.
Mr. Diamond-Goldberg previously served as a director of Wi2Wi from August 2010 until his resignation on July 1, 2011. As described in this Report, we entered into an Asset Purchase Agreement with Wi2Wi, Inc., formerly known as, International Sovereign Energy Corp. and acquired the Wi2Wi Assets on October 20, 2011. The terms of our acquisition of the Wi2Wi Assets was determined through independent negotiation between James Vandeberg, our former Vice President and Chief Financial Officer, and Sharad Mistry, Wi2Wi’s Chief Executive Officer and Chief Financial Officer. Mr. Diamond-Goldberg recused himself from all negotiations with respect to the transaction.
Andrew Reckles. is our former Chairman and Chief Executive Officer. He also a principal of Northpoint Energy Partners (“NPE”). NPE served as a broker on the acquisition of Maxxon. NPE received a brokerage payment from Legend on the Maxxon acquisition. The agreement between NPE and Legend was reviewed and approved by our Board, and found to be at or below market brokerage pricing.
Conflicts of Interest
Mr. Marshall Diamond-Goldberg is our former CEO, former President and Chief Operating Officer and former Director. He is also a former director of Wi2Wi. We have not found any reason to be concerned with this potential conflict of interest since Mr. Diamond-Goldberg resigned as a member of the board of directors of Wi2Wi effective as of July 1, 2011, and he was not involved on Wi2Wi’s behalf in negotiating the terms of the Asset Purchase Agreement.
As stated above, Andrew Reckles. is our former Chairman and Chief Executive Officer. He also a principal of Northpoint Energy Partners (“NPE”). NPE served as a broker on the acquisition of Maxxon. NPE received a brokerage payment from Legend on the Maxxon acquisition. The agreement between NPE and Legend was reviewed and approved by our Board, and found to be at or below market brokerage pricing.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Marcum. audited our financial statements for the year ended December 31, 2016. GBH CPAs, PC audited our financial statements for the year ended December 31, 2015.
Policy for Approval of Audit and Permitted Non-Audit Services
The Board of Directors, in its discretion, may direct the appointment of different public accountants at any time during the year, if the Board believes that a change would be in the best interests of the stockholders. During 2016 and 2015, the Board of Directors considered the audit fees, audit-related fees, tax fees and other fees paid to our accountants, as disclosed below, and determined that the provision of such services by our independent registered public accounting firm was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
Audit and Related Fees
The table below sets forth the aggregate fees billed by Marcum LLP and GBH CPAs PC for professional services rendered in fiscal years ended December 31, 2016 and 2015, respectively.
(1) “Audit Fees” represent fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements included in our reports on Form 10-Q, and audit services provided in connection with other statutory or regulatory filings. Fees billed during the year ended December 31, 2016 from Marcum LLP and GBH CPAs PC totaled $67,310 and $95,838, respectively. All 2015 audit fees where for services rendered by GBH CPAs PC.
(2) “Audit-Related Fees” generally represent fees for assurance and related services reasonably related to the performance of the audit or review of our financial statements. All such fees in 2016 and 2015 were for services rendered by GBH CPAs PC.
(3) “Tax Fees” generally represent fees for tax advice. All tax fees in 2016 and 2015 were for services rendered by GBH CPAs PC.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this Report are as follows:
1) Financial Statements: The consolidated financial statements, related notes and report of independent registered public accounting firm are included in Item 8 of Part II of this Report.
2) Financial Statement Schedules: All schedules have been omitted because they are not applicable or not required, or the required information is included in the financial statements or notes thereto.
3) Exhibits: The required exhibits are included at the end of this Report and are described in the exhibit index.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 31, 2017.
LEGEND OIL AND GAS, LTD.
By: /s/ Warren S. Binderman
Warren S. Binderman, Chief Executive Officer, Chief Financial Officer
President, Secretary, Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Capacities
Date
/s/ Warren S. Binderman
Chief Executive Officer, Chief Financial
Officer, and Director
March 31, 2017
Warren S. Binderman
(Principal Accounting Officer)
EXHIBIT INDEX
The exhibits below are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference. Where an exhibit is incorporated by reference, the document to which it is cross referenced is made.
Exhibit
No.
Description
Location
2.1
Agreement and Plan of Merger with New Western Energy Corporation New Western Energy Merger Corporation and the Company, dated January 23, 2014
Incorporated by reference herein from our report on Form 8-K dated January 23, 2014, filed with the SEC on January 27, 2014.
2.2
Membership Interest Purchase Agreement dated April 3, 2015, among the Company, Sher Trucking, LLC, Albert Valentin and Steven Wallace
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
2.3
Letter Agreement between the Company and Steven Wallace
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
2.4
Letter Agreement between the Company and Sher Trucking, LLC dated April 13, 2015
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
3.1
Amended and Restated Articles of Incorporation dated January 29, 2007
Incorporated by reference herein from our report on Form 8-K dated January 29, 2007, filed with the SEC on January 30, 2007.
3.2
First Articles of Amendment to the Amended and Restated Articles of Incorporation dated October 4, 2010
Incorporated by reference herein from our definitive Information Statement filed with the SEC on October 19, 2010.
3.3
Articles of Amendment to the Articles of Incorporation dated August 12, 2011
Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.
3.4
Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
3.5
Articles of Amendment to the Articles of Incorporation dated December 21, 2015.
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2016, and filed with the SEC on April 7, 2016.
3.6
Bylaws dated November 29, 2000
Incorporated by reference herein from our registration statement on Form 10-SB, filed with the SEC on April 25, 2002.
4.1
Specimen Legend Oil and Gas, Ltd. Common Stock Certificate
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
4.2
Form of Warrant issued to Iconic Investment Co.
Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.
Exhibit
No.
Description
Location
4.3
Form of Warrant issued in connection with August 2011 unit financing
Incorporated by reference herein from our report on Form 10-Q for the period ended June 30, 2011, filed with the SEC on August 12, 2011.
4.4
Specimen Legend Oil and Gas, Ltd. Convertible Preferred Stock Certificate
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
4.5
Original Issue Discount Senior Secured Debenture Due May 16, 2016 dated April 2, 2015
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
4.6
Original Discount Senior Secured Convertible Debenture Due March 1, 2016.
Incorporated by reference herein from our report on Form 8-K dated April 25, 2015 and filed with the SEC on April 29, 2015.
4.7
Articles of Amendment to the Articles of Incorporation of the Company dated May 1, 2015.
Incorporated by reference herein from our report on Form 8-K dated May 7, 2015 and filed with the SEC on May 11, 2015.
4.8
Original Discount Senior Secured Convertible Debenture Due March 1, 2016
Incorporated by reference herein from our report on 8-K dated June 30, 2015 and filed with the SEC on July 6, 2015.
4.9
Original Discount Senior Secured Convertible Debenture Due March 1, 2017 in the original principal amount of $654,000
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
4.10
Promissory Note dated October 22, 2015 in the original principal amount of $1,928,740.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
4.11
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated January 29, 2016 and filed with the SEC on February 2, 2016.
4.12
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated March 25, 2016 and filed with the SEC on March 31, 2016.
4.13
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated May 27, 2016 and filed with the SEC on June 3, 2016.
4.14
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated July 5, 2016 and filed with the SEC on July 7, 2016.
4.15
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated July 27, 2016 and filed with the SEC on August 1, 2016.
4.16
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated August 22, 2016 and filed with the SEC on August 23, 2016.
4.17
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated September 30, 2016 and filed with the SEC on October 6, 2016.
4.18
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated October 27, 2016 and filed with the SEC on November 2, 2016.
4.19
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated November 29, 2016 and filed with the SEC on December 2, 2016
10.1*
Consulting Agreement by and between Marlin Consulting Corp. and Legend dated September 1, 2010
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
10.2
Agreement for Purchase and Sale by and between Piqua Petro, Inc. and the Company dated October 20, 2010 (Piqua Project)
Incorporated by reference herein from our report on Form 8-K dated October 29, 2010, filed with the SEC on November 4, 2010.
10.3
Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated February 25, 2011 (Bakken Project)
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
Exhibit
No.
Description
Location
10.4
Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated March 23, 2011 (Bakken Project)
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
10.5
Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated March 30, 2011 (Bakken Project)
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011
10.6
Subscription Agreement by and between Legend Oil and Gas, Ltd. and Iconic Investment Co. dated January 21, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.
10.7
Subscription Agreement by and between Legend Oil and Gas, Ltd. and Iconic Investment Co. dated April 28, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.
10.8A*
Legend Oil and Gas, Ltd. 2011 Stock Incentive Plan, as amended
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012.
10.8B*
Form of Stock Option Agreement under 2011 Stock Incentive Plan
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012.
10.9
Form of Subscription Agreement in connection with August 2011 unit financing
Incorporated by reference herein from our report on Form 10-Q for the period ended June 30, 2011, and filed with the SEC on August 12, 2011.
10.10A
Asset Purchase Agreement by and among International Sovereign Energy Corp., Legend Oil and Gas, Ltd., and Legend Energy Canada Ltd. dated September 13, 2011
Incorporated by reference herein from our report on Form 8-K dated September 12, 2011, filed with the SEC on September 16, 2011.
10.10B
Amending Agreement to Asset Purchase Agreement, by and among International Sovereign Energy Corp., Legend Oil and Gas, Ltd., and Legend Energy Canada Ltd. dated October 20, 2011
Incorporated by reference herein from our report on Form 8-K/A dated October 20, 2011, filed with the SEC on November 23, 2011
10.11
Credit Facility Offering Letter by and between National Bank of Canada and Legend Energy Canada Ltd. dated August 15, 2011
Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.
10.12
Acknowledgment of Debt Revolving Demand Credit Agreement by and between National Bank of Canada and Legend Energy Canada Ltd. dated August 15, 2011
Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.
10.13
Fixed and Floating Charge Demand Debenture by and between National Bank of Canada and Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.14
Pledge by Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.15
Assignment of Book Debts by Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.16
Negative Pledge and Undertaking by and between National Bank of Canada and Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.17
Amending Offering Letter by and among National Bank of Canada, Legend Energy Canada Ltd. and the Company dated March 26, 2012
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2011, and filed with the SEC on March 30, 2012.
10.18
CA $1.5 million Variable Rate Demand Note by Legend Energy Canada Ltd. in favor of National Bank of Canada
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2011, and filed with the SEC on March 30, 2012.
10.19
Office Space Lease by and between Dundeal Canada (GP) Inc. and Legend Energy Canada Ltd., dated October 17, 2011
Incorporated by reference herein from our report on Form 8-K/A dated October 20, 2011, filed with the SEC on November 23, 2011
10.20*
Summary of Non-Employee Director Compensation
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012
10.21*
Form of Director Indemnification Agreement
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012
10.22
Settlement and Termination Agreement with Wi2Wi Corporation dated May 1, 2013
Incorporated by reference herein from our report on Form 8-K dated May 1, 2013, filed with the SEC on May 1, 2013.
10.23
Securities Purchase Agreement with Hillair Capital Investments L.P.
Incorporated by reference herein from our report on Form 8-K dated May 28, 2013, filed with the SEC on July 17, 2013.
10.24
Legend Oil and Gas, Ltd. 2013 Stock Incentive Plan
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015, filed with the SEC on September 9, 2013.
Exhibit
No.
Description
Location
10.25
Securities Purchase Agreement dated April 2, 2015, between the Company and Hillair Capital Investments, L.P.
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
10.26
Secured Promissory Note dated April 3, 2015, issued by the Company to Sher Trucking, LLC
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
10.27
Securities Purchase Agreement dated April 28, 2015
Incorporated by reference herein from our report on Form 10-K for the period ending April 25, 2015, and filed with the SEC on April 29, 2015.
10.28
Securities Purchase Agreement dated June 30, 2015.
Incorporated by reference herein from our report on Form 8-K dated June 30, 2015 and filed with the SEC on July 6, 2015.
10.29
Securities Purchase Agreement dated October 21, 2015.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.30
Securities Agreement dated October 21, 2015, between the Company and Hillair Capital Investments, L.P.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.31
Purchase and Sale Agreement dated October 28, 2015, between the Company and HPH Kansas LLC.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.32
Assignment of Oil And Gas Lease and Bill Of Sale
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.33
Letter Agreement dated November 16, 2015, between the Company and Northpoint Energy Partners, LLC, with respect to the engagement of Andrew Reckles as Chairman and Chief Executive Officer of the Company
Incorporated by reference herein from our report on Form 10-Q dated September 30, 2011 and filed with the SEC on November 20, 2015.
10.34
Letter Agreement dated November 16, 2015, between the Company and Binderman Group, LLC, with respect to the engagement of Warren S. Binderman as President, Chief Financial Officer and Board Secretary/Treasurer of the Company.
Incorporated by reference herein from our report on Form 10-Q dated September 30, 2011 and filed with the SEC on November 20, 2015.
10.35
Securities Purchase Agreement dated January 29, 2016.
Incorporated by reference herein from our report on Form 8-K dated January 29, 2016 and filed with the SEC on February 2, 2016.
10.36
Securities Purchase Agreement dated March 25, 2016.
Incorporated by reference herein from our report on Form 8-K dated March 25, 2016 and filed with the SEC on March 31, 2016.
10.37
Securities Purchase Agreement dated May 27, 2016.
Incorporated by reference herein from our report on Form 8-K dated May 27, 2016 and filed with the SEC on June 3, 2016.
10.38
Securities Purchase Agreement dated July 5, 2016.
Incorporated by reference herein from our report on Form 8-K dated July 5, 2016 and filed with the SEC on July 7, 2016.
10.39
Securities Purchase Agreement dated July 27, 2016.
Incorporated by reference herein from our report on Form 8-K dated July 27, 2016 and filed with the SEC on August 1, 2016.
10.40
Securities Purchase Agreement dated August 22, 2016.
Incorporated by reference herein from our report on Form 8-K dated August 22, 2016 and filed with the SEC on August 23, 2016.
10.41
Securities Purchase Agreement dated September 30, 2016.
Incorporated by reference herein from our report on Form 8-K dated September 30, 2016 and filed with the SEC on October 6, 2016.
10.42
Securities Purchase Agreement dated October 27, 2016.
Incorporated by reference herein from our report on Form 8-K dated October 27, 2016 and filed with the SEC on November 2, 2016.
10.43
Securities Purchase Agreement dated November 29, 2016.
Incorporated by reference herein from our report on Form 8-K dated November 29, 2016 and filed with the SEC on December 2, 2016.
10.44
Amended and Restated Secured Promissory Note payable to Sher Trucking, LLC
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2016, and filed with the SEC on April 7, 2016.
14.1
Code of Ethics
Incorporated by reference herein from our report on Form 8-K dated March 25, 2016 and filed with the SEC on March 31, 2016.
21.1
Subsidiaries
Filed herewith
*
Management contract or compensatory plan or arrangement.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
As of the date of this report’s release, our Board of Directors consists of four members, one of which is an executive officer. The term of office of each director expires at the next annual meeting of our stockholders. Directors serve until their respective successors have been elected and qualified. Executive officers are appointed by and serve at the pleasure of the Board of Directors.
Set forth below is biographical information for each of our current directors.
Warren S. Binderman
Warren is the Chief Executive Officer, and Chief Financial Officer of Legend. He previously served as the Chief Financial Officer since July 2014. He also serves on the Company’s Board and is the Corporate Secretary. He is also the managing member of the Binderman Group, LLC, a specialized accounting and business consulting firm performing services throughout the United States. Warren excels in servicing and communicating with clients as they move through the transaction process-from IPO, private equity deals, mergers and acquisitions, public shell transactions and reverse mergers, and other such ownership transitions. He is a skilled business partner who listens and is committed to helping Clients achieve their goals, ensuring that the transactions being considered are properly supported and meet the appropriate financial and strategic objectives. With deep knowledge and experience across industries, he works with clients to ensure that money makes sense for their business and life. Warren’s expertise includes investment due diligence, mergers and acquisitions, private placement reviews, and restructuring services. He has demonstrated experience in various industry sectors and has worked with many publicly held companies, financial institutions, and closely held companies. Due to his experience working with public and private sector entities, he has an excellent depth of knowledge in both sectors’ activities and transactions. Warren also has significant depth performing due diligence, consulting services, and audits of entities with complex structures. Before working with Legend and starting the Binderman Group, Warren served in various capacities with International accounting firms in the capacities of partner, director, manager and staff. He worked for Arthur Andersen LLP for nine years and KPMG LLP for over three years, as well as other national and international firms throughout his career. Warren received his Bachelor of Business Administration degree from the University of Maryland in 1990 and was a Magna Cum Laude graduate of The Smith Business School, with a major in Accounting. He is a member of the AICPA, and is a CPA in Georgia, and Maryland.
Unless otherwise stated above, none of our directors or executive officers is a director of any other public company, nor are they related to any officer, director or affiliate of the Company. Additionally, none of our directors or executive officers is a party to any pending legal proceeding, is subject to a bankruptcy petition filed against them or have been convicted in, or is subject to, any criminal proceeding.
Alais Griffin
On March 7, 2016, Alais Griffin, age 43, joined the Company’s Board of Directors. Ms. Griffin currently serves as the General Counsel of a large, national nonprofit organization. As the organization’s chief legal officer, she oversees all legal issues concerning the entity’s operations.
Prior to joining the nonprofit world, Ms. Griffin was a partner in the Chicago office of an international law firm, where she focused her practice on litigation, compliance and internal investigations, with an emphasis on transportation. As a former senior political appointee in the United States Department of Transportation (DOT), Ms. Griffin brought extensive experience in transportation-related enforcement matters and litigation, as well as unique insights into DOT regulatory compliance, regulatory development and other government processes. She represented clients in a wide variety of enforcement, compliance and financing matters before almost every DOT agency. She also served as a Steering Committee Member of the American Bar Association’s Section of International Law, International Transportation Committee and was elected Vice-Chair before leaving private practice.
Ms. Griffin’s experience also includes assisting with the development and implementation of internal compliance initiatives for multinational companies subject to the Foreign Corrupt Practices Act (FCPA) and other bribery acts, including those in Sub-Saharan Africa. She has spoken both in the United States and abroad on compliance related-topics, including the FCPA and transportation regulations, and has been published widely on regulatory and compliance matters.
From 2009 to 2012, Ms. Griffin served as the Counselor to the DOT General Counsel, where she worked closely with the General Counsel, the Office of the Secretary and other senior political appointees on the Department’s regulatory, policy and litigation matters. She subsequently served as the Chief Counsel for the Federal Motor Carrier Safety Administration, the DOT agency that oversees commercial motor vehicles. As the Agency’s chief legal officer, Ms. Griffin managed FMCSA’s litigation matters as well as the legal and strategic review of Agency policies, programs and regulations. In her capacity as a senior advisor, Alais also worked regularly on legislative and regulatory matters with the White House, other Executive Branch agencies and Congress.
Ms. Griffin received a Bachelor of Arts degree, cum laude general studies, from Harvard University and a JD, cum laude, from Northwestern Pritzker School of Law, where she was Executive Editor of the Northwestern University Law Review and a member of the Order of the Coif. In 2013, she received the “Outstanding 50 Asian Americans in Business Award” from the Asian American Business Development Center.
Jeffrey Kaplin
Jeff has lived in Atlanta, GA since 1987. Jeff graduated from Indiana University in Bloomington, Indiana in May 1987 with a Bachelor of Science with a major in Accounting. He has practiced public accounting for over 20 years and is the managing partner of the public accounting firm, Rosenthal & Kaplin, P.C., which is a member firm of the AICPA. He is a financial expert in the areas of taxation (corporate, individual and partnership), and as a CPA, practices auditing and attestation services. Other areas relative to Jeff’s expertise include IRS representation, litigation support, and merger and acquisition services. Jeff is currently serving on the B’nai Torah Board of Trustees, The Standard Country Club Board of Governors and is a former Epstein School Trustee. He is an active CPA in Georgia, and is a member of the American Institute of Certified Public Accountants (AICPA) and the Georgia Society of Certified Public Accountants (GSCPA).
Neal Kaufman
Neal is a founding member of Hillair Capital, our majority stockholder. He has over fifteen years of operating experience with large and small publicly traded companies and also has significant experience supporting financing activities. Neal opened the West Coast operations for Ardour Capital Investments, LLC, an investment bank wholly focused on the clean technology sector and prior to that, served as the Chief Executive Officer of TieTek. Neal held various senior management positions at 3Com Corporation, and also worked for the Internet arm of NBC Television. He began his career at McKinsey & Co., working in the U.S., Europe and South America. Neal has an AB in economics magna cum laude from Harvard College, a MA from Stanford University and a MBA from Harvard Business School where he was a Baker Scholar. Mr. Kaufman’s pertinent experience, qualifications, attributes, and skills include expertise in finance, strategy, and operations.
Sean McAvoy
Sean M. McAvoy was appointed as a director of the Company as of January 1, 2017. Sean is a founding member, since 2010, of Hillair Capital Management LLC and its affiliated funds. He has over twenty years of experience in structuring and negotiating transactions primarily in the public markets. Between 1996 and 2008, Sean was a member of the mergers and acquisitions, private equity and corporate finance practices at Jones Day, an international law firm, where he served as a founding partner of the firm’s Silicon Valley office from 2002 to 2008. At Jones Day, Sean represented public companies and their boards of directors, as well as financial sponsors, in domestic and cross-border mergers and acquisitions, auctioned dispositions, unsolicited and negotiated tender offers, leveraged buyouts, including going-private transactions, and leveraged recapitalizations. Sean also counseled boards of directors and senior management regarding corporate governance, fiduciary duty and takeover preparedness as well as disclosure obligations. Prior to his corporate legal career, Sean served as a Legislative Aide to Senator William S. Cohen and as a Professional Staff Member of the United States Senate Governmental Affairs Committee. Sean also served as a Special Counsel and senior staff member on Senator John McCain’s 2008 presidential campaign. Currently, Sean serves on the boards of SG Blocks, Inc., the premier innovator and designer of container-based structures, and The Orvis Company, Inc., a specialty retailer and sporting goods company and also on the board of The Pacific Research Institute, a California-based free-market think tank. Sean is an honors graduate of Williams College and earned advanced degrees at the London School of Economics and Political Science, where he was an AFLSE Scholar, and Georgetown University Law School, where he was a member of the Georgetown Journal of International Law.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than 10% of our common stock (collectively, “Reporting Persons”) to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock. Reporting Persons are also required by SEC regulations to furnish us with copies of all such ownership reports they file. SEC regulations also require us to identify in this Report any Reporting Person who failed to file any such report on a timely basis.
We believe that all Reporting Persons complied with all applicable Section 16(a) filing requirements for fiscal year 2015, based solely on our review of the copies of such reports received or written communications from certain Reporting Persons.
Code of Ethics
We have a Code of Ethics that applies to our three key executives and directors. A copy of the Code of Ethics is included as Exhibit 14.1 to this Report and is available on our corporate website at www.midconoil.com in the section “About Legend.”
Audit Committee
During 2015, Jeffrey Kaplin, CPA was appointed to our Board. He was appointed the sole, independent member of the committee, serving as our “financial expert” to serve as the Chair of the audit committee.
On November 25, 2016, Neal Kaufman, age 48, joined the Company’s Board of Directors. Neal is a founding member of Hillair, our majority stockholder.
On November 29, 2016, Alais Griffin, an outside director of the Company, assumed the role of interim Board Chair.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The table below shows all compensation awarded, earned by or paid to Mssrs. Andrew Reckles, Former Chairman of the Board and CEO, Marshall Diamond-Goldberg, Former President and COO, Warren S. Binderman, President, CEO, CFO, and Secretary/Treasurer, James Vandeberg, former CFO and Secretary and Kyle Severson, former Chief Financial Officer (our “NEOs”) for each of the fiscal years ended December 31, 2016, 2015 and 2014:
Compensation Philosophy and Objectives
Our executive compensation program that we apply to our NEOs will be designed to attract and retain qualified and experienced executives who will contribute to our success. The executive compensation program is designed to attract, motivate and retain individuals with the skills and qualities necessary to support and develop our business within the framework of our small size and available resources. The Board of Directors has sole and unfettered discretion with respect to decisions regarding the compensation of the NEOs.
Elements of Compensation
Our executive compensation program is anticipated to consist of two components: (i) base compensation, and (ii) a long-term compensation component in the form of stock options and stock awards. Both components are determined and administered by the Board of Directors. The stock incentive component is expected to form an essential part of the NEOs’ compensation.
Base Compensation
Base compensation for the NEOs is reviewed from time to time and set by the Board of Directors, and is based on the individual’s job responsibilities, contribution, experience and proven or expected performance, as well as to market conditions. In setting base compensation levels, consideration will be given to such factors as level of responsibility, experience and expertise. Subjective factors such as leadership, commitment and attitude will also be considered.
Stock Options and Awards
To provide a long-term component to the executive compensation program, our executive officers, directors, employees and consultants may be granted Options and Awards (as those terms are defined below) under our 2011 Stock Incentive Plan and 2013 Stock Incentive Plan. The maximization of stockholder value is encouraged by granting equity incentive awards. The President will make recommendations to the Board of Directors for the other executive officers and key employees. These recommendations take into account factors such as equity compensation given in previous years, the number of Options and Awards outstanding per individual and the level of responsibility.
Narrative Disclosure to Summary Compensation Table
Outstanding Equity Awards at 2016 Fiscal Year-End
There are no outstanding equity awards at December 31, 2016.
Director Compensation
We paid and/or accrued a monthly fee of $500 per month to Mr. Kaplin during his period as Director during 2015. In 2016, both outside directors, Ms. Griffin and Mr. Kaplin, are paid a monthly board fee of $2,000.
2016 Stock Incentive Plan
On October 26, 2016, our Board of Directors approved the Legend Oil and Gas, Ltd. 2016 Stock Incentive Plan (“Plan”). The Plan has not been formalized at this time, as we have not filed a Form S-8. This Plan provides for the grant of options (“Options”) to purchase common shares, and stock awards (“Awards”) consisting of common shares, to eligible participants, executive officers, and employees. The terms and conditions of the 2016 Plan apply equally to all participants. We reserved a total of 250,000,000 shares of common stock for issuance under the Plan. Further, the Board and the majority stockholders cancelled all prior Stock Incentive Plans, including the 2014 and 2014 Plans depicted below.
On September 30, 2013, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2013 Stock Incentive plan. The Plan provides for the grant of options to purchase shares of our common stock, and stock awards consisting of shares of our common stock, to eligible participants, including directors, executive officers, employees, and consultants of the Company. We have reserved 10,000,000 shares of common stock for issuance under the Plan and have issued 750,000 shares to Mr. Vandeberg.
The Plan Administrator, which is currently the Board of Directors, may designate which of our directors, officers, employees and consultants are to be granted Options and Awards. The Plan Administrator has the authority, in its sole discretion, to determine the type or types of awards to be granted under the Plan. Awards may be granted singly or in combination.
Potential Payments upon Resignation, Retirement, or Change of Control
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The tables below set forth information with respect to the beneficial ownership of our common shares as of March 31, 2017 by our directors, named executive officers, and directors and executive officers as a group, as well as each person (or group of affiliated persons) who is known by us to beneficially own 5% or more of our common shares. As of the latest practical date before filing this annual report, there were 942,083,273 common shares issued and outstanding.
The percentages of common shares beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. To our knowledge, unless indicated in the footnotes to the table, each beneficial owner named in the tables below has sole voting and sole investment power with respect to all shares beneficially owned.
(1) The information for such stockholders are based on the list of record holders maintained by our stock transfer agent. Such stockholder has not filed a Schedule 13D with the SEC disclosing its greater than five percent ownership.
Securities Authorized for Issuance Under Equity Compensation Plans
On September 5, 2014, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2014 Stock Incentive Plan, included in the Form S-8 filed on that date. This Stock Incentive Plan provides for the grant of options (“Options”) to purchase common shares, and stock awards (“Awards”) consisting of common shares, to eligible participants, including our directors, executive officers, employees and consultants. The terms and conditions of the 2014 Stock Incentive Plan apply equally to all participants. We reserved a total of 65,000,000 common shares for issuance under the Plan. No shares or stock options have been issued under this Plan as of this date. This Plan has been cancelled by the Board of Directors.
On October 17, 2013, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2013 Stock Incentive Plan. We reserved a total of 10,000,000 common shares for issuance under the Plan. This Plan has not been approved by stockholders. There are currently no options outstanding under the 2013 Stock Incentive Plan, and a grant for 750,000 common shares was issued on October 17, 2014. This Plan has been cancelled by the Board of Directors.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Party Transactions
Except as set forth below, we are not aware of any material interest, direct or indirect, of any of our directors or executive officers, any person beneficially owning, directly or indirectly, 10% or more of our voting securities, or any associate or affiliate of such person in any transaction since the beginning of the last fiscal year or in any proposed transaction which in either case has materially affected or will materially affect us.
Mr. Diamond-Goldberg previously served as a director of Wi2Wi from August 2010 until his resignation on July 1, 2011. As described in this Report, we entered into an Asset Purchase Agreement with Wi2Wi, Inc., formerly known as, International Sovereign Energy Corp. and acquired the Wi2Wi Assets on October 20, 2011. The terms of our acquisition of the Wi2Wi Assets was determined through independent negotiation between James Vandeberg, our former Vice President and Chief Financial Officer, and Sharad Mistry, Wi2Wi’s Chief Executive Officer and Chief Financial Officer. Mr. Diamond-Goldberg recused himself from all negotiations with respect to the transaction.
Andrew Reckles. is our former Chairman and Chief Executive Officer. He also a principal of Northpoint Energy Partners (“NPE”). NPE served as a broker on the acquisition of Maxxon. NPE received a brokerage payment from Legend on the Maxxon acquisition. The agreement between NPE and Legend was reviewed and approved by our Board, and found to be at or below market brokerage pricing.
Conflicts of Interest
Mr. Marshall Diamond-Goldberg is our former CEO, former President and Chief Operating Officer and former Director. He is also a former director of Wi2Wi. We have not found any reason to be concerned with this potential conflict of interest since Mr. Diamond-Goldberg resigned as a member of the board of directors of Wi2Wi effective as of July 1, 2011, and he was not involved on Wi2Wi’s behalf in negotiating the terms of the Asset Purchase Agreement.
As stated above, Andrew Reckles. is our former Chairman and Chief Executive Officer. He also a principal of Northpoint Energy Partners (“NPE”). NPE served as a broker on the acquisition of Maxxon. NPE received a brokerage payment from Legend on the Maxxon acquisition. The agreement between NPE and Legend was reviewed and approved by our Board, and found to be at or below market brokerage pricing.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Marcum. audited our financial statements for the year ended December 31, 2016. GBH CPAs, PC audited our financial statements for the year ended December 31, 2015.
Policy for Approval of Audit and Permitted Non-Audit Services
The Board of Directors, in its discretion, may direct the appointment of different public accountants at any time during the year, if the Board believes that a change would be in the best interests of the stockholders. During 2016 and 2015, the Board of Directors considered the audit fees, audit-related fees, tax fees and other fees paid to our accountants, as disclosed below, and determined that the provision of such services by our independent registered public accounting firm was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
Audit and Related Fees
The table below sets forth the aggregate fees billed by Marcum LLP and GBH CPAs PC for professional services rendered in fiscal years ended December 31, 2016 and 2015, respectively.
(1) “Audit Fees” represent fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements included in our reports on Form 10-Q, and audit services provided in connection with other statutory or regulatory filings. Fees billed during the year ended December 31, 2016 from Marcum LLP and GBH CPAs PC totaled $67,310 and $95,838, respectively. All 2015 audit fees where for services rendered by GBH CPAs PC.
(2) “Audit-Related Fees” generally represent fees for assurance and related services reasonably related to the performance of the audit or review of our financial statements. All such fees in 2016 and 2015 were for services rendered by GBH CPAs PC.
(3) “Tax Fees” generally represent fees for tax advice. All tax fees in 2016 and 2015 were for services rendered by GBH CPAs PC.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this Report are as follows:
1) Financial Statements: The consolidated financial statements, related notes and report of independent registered public accounting firm are included in Item 8 of Part II of this Report.
2) Financial Statement Schedules: All schedules have been omitted because they are not applicable or not required, or the required information is included in the financial statements or notes thereto.
3) Exhibits: The required exhibits are included at the end of this Report and are described in the exhibit index.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 31, 2017.
LEGEND OIL AND GAS, LTD.
By: /s/ Warren S. Binderman
Warren S. Binderman, Chief Executive Officer, Chief Financial Officer
President, Secretary, Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Capacities
Date
/s/ Warren S. Binderman
Chief Executive Officer, Chief Financial
Officer, and Director
March 31, 2017
Warren S. Binderman
(Principal Accounting Officer)
EXHIBIT INDEX
The exhibits below are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference. Where an exhibit is incorporated by reference, the document to which it is cross referenced is made.
Exhibit
No.
Description
Location
2.1
Agreement and Plan of Merger with New Western Energy Corporation New Western Energy Merger Corporation and the Company, dated January 23, 2014
Incorporated by reference herein from our report on Form 8-K dated January 23, 2014, filed with the SEC on January 27, 2014.
2.2
Membership Interest Purchase Agreement dated April 3, 2015, among the Company, Sher Trucking, LLC, Albert Valentin and Steven Wallace
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
2.3
Letter Agreement between the Company and Steven Wallace
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
2.4
Letter Agreement between the Company and Sher Trucking, LLC dated April 13, 2015
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
3.1
Amended and Restated Articles of Incorporation dated January 29, 2007
Incorporated by reference herein from our report on Form 8-K dated January 29, 2007, filed with the SEC on January 30, 2007.
3.2
First Articles of Amendment to the Amended and Restated Articles of Incorporation dated October 4, 2010
Incorporated by reference herein from our definitive Information Statement filed with the SEC on October 19, 2010.
3.3
Articles of Amendment to the Articles of Incorporation dated August 12, 2011
Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.
3.4
Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
3.5
Articles of Amendment to the Articles of Incorporation dated December 21, 2015.
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2016, and filed with the SEC on April 7, 2016.
3.6
Bylaws dated November 29, 2000
Incorporated by reference herein from our registration statement on Form 10-SB, filed with the SEC on April 25, 2002.
4.1
Specimen Legend Oil and Gas, Ltd. Common Stock Certificate
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
4.2
Form of Warrant issued to Iconic Investment Co.
Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.
Exhibit
No.
Description
Location
4.3
Form of Warrant issued in connection with August 2011 unit financing
Incorporated by reference herein from our report on Form 10-Q for the period ended June 30, 2011, filed with the SEC on August 12, 2011.
4.4
Specimen Legend Oil and Gas, Ltd. Convertible Preferred Stock Certificate
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
4.5
Original Issue Discount Senior Secured Debenture Due May 16, 2016 dated April 2, 2015
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
4.6
Original Discount Senior Secured Convertible Debenture Due March 1, 2016.
Incorporated by reference herein from our report on Form 8-K dated April 25, 2015 and filed with the SEC on April 29, 2015.
4.7
Articles of Amendment to the Articles of Incorporation of the Company dated May 1, 2015.
Incorporated by reference herein from our report on Form 8-K dated May 7, 2015 and filed with the SEC on May 11, 2015.
4.8
Original Discount Senior Secured Convertible Debenture Due March 1, 2016
Incorporated by reference herein from our report on 8-K dated June 30, 2015 and filed with the SEC on July 6, 2015.
4.9
Original Discount Senior Secured Convertible Debenture Due March 1, 2017 in the original principal amount of $654,000
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
4.10
Promissory Note dated October 22, 2015 in the original principal amount of $1,928,740.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
4.11
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated January 29, 2016 and filed with the SEC on February 2, 2016.
4.12
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated March 25, 2016 and filed with the SEC on March 31, 2016.
4.13
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated May 27, 2016 and filed with the SEC on June 3, 2016.
4.14
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated July 5, 2016 and filed with the SEC on July 7, 2016.
4.15
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated July 27, 2016 and filed with the SEC on August 1, 2016.
4.16
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated August 22, 2016 and filed with the SEC on August 23, 2016.
4.17
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated September 30, 2016 and filed with the SEC on October 6, 2016.
4.18
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated October 27, 2016 and filed with the SEC on November 2, 2016.
4.19
Original Discount Senior Convertible Debenture Due March 1, 2018.
Incorporated by reference herein from our report on Form 8-K dated November 29, 2016 and filed with the SEC on December 2, 2016
10.1*
Consulting Agreement by and between Marlin Consulting Corp. and Legend dated September 1, 2010
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
10.2
Agreement for Purchase and Sale by and between Piqua Petro, Inc. and the Company dated October 20, 2010 (Piqua Project)
Incorporated by reference herein from our report on Form 8-K dated October 29, 2010, filed with the SEC on November 4, 2010.
10.3
Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated February 25, 2011 (Bakken Project)
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
Exhibit
No.
Description
Location
10.4
Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated March 23, 2011 (Bakken Project)
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011.
10.5
Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated March 30, 2011 (Bakken Project)
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2010, and filed with the SEC on March 31, 2011
10.6
Subscription Agreement by and between Legend Oil and Gas, Ltd. and Iconic Investment Co. dated January 21, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.
10.7
Subscription Agreement by and between Legend Oil and Gas, Ltd. and Iconic Investment Co. dated April 28, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.
10.8A*
Legend Oil and Gas, Ltd. 2011 Stock Incentive Plan, as amended
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012.
10.8B*
Form of Stock Option Agreement under 2011 Stock Incentive Plan
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012.
10.9
Form of Subscription Agreement in connection with August 2011 unit financing
Incorporated by reference herein from our report on Form 10-Q for the period ended June 30, 2011, and filed with the SEC on August 12, 2011.
10.10A
Asset Purchase Agreement by and among International Sovereign Energy Corp., Legend Oil and Gas, Ltd., and Legend Energy Canada Ltd. dated September 13, 2011
Incorporated by reference herein from our report on Form 8-K dated September 12, 2011, filed with the SEC on September 16, 2011.
10.10B
Amending Agreement to Asset Purchase Agreement, by and among International Sovereign Energy Corp., Legend Oil and Gas, Ltd., and Legend Energy Canada Ltd. dated October 20, 2011
Incorporated by reference herein from our report on Form 8-K/A dated October 20, 2011, filed with the SEC on November 23, 2011
10.11
Credit Facility Offering Letter by and between National Bank of Canada and Legend Energy Canada Ltd. dated August 15, 2011
Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.
10.12
Acknowledgment of Debt Revolving Demand Credit Agreement by and between National Bank of Canada and Legend Energy Canada Ltd. dated August 15, 2011
Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.
10.13
Fixed and Floating Charge Demand Debenture by and between National Bank of Canada and Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.14
Pledge by Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.15
Assignment of Book Debts by Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.16
Negative Pledge and Undertaking by and between National Bank of Canada and Legend Energy Canada Ltd. dated October 19, 2011
Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.
10.17
Amending Offering Letter by and among National Bank of Canada, Legend Energy Canada Ltd. and the Company dated March 26, 2012
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2011, and filed with the SEC on March 30, 2012.
10.18
CA $1.5 million Variable Rate Demand Note by Legend Energy Canada Ltd. in favor of National Bank of Canada
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2011, and filed with the SEC on March 30, 2012.
10.19
Office Space Lease by and between Dundeal Canada (GP) Inc. and Legend Energy Canada Ltd., dated October 17, 2011
Incorporated by reference herein from our report on Form 8-K/A dated October 20, 2011, filed with the SEC on November 23, 2011
10.20*
Summary of Non-Employee Director Compensation
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012
10.21*
Form of Director Indemnification Agreement
Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012
10.22
Settlement and Termination Agreement with Wi2Wi Corporation dated May 1, 2013
Incorporated by reference herein from our report on Form 8-K dated May 1, 2013, filed with the SEC on May 1, 2013.
10.23
Securities Purchase Agreement with Hillair Capital Investments L.P.
Incorporated by reference herein from our report on Form 8-K dated May 28, 2013, filed with the SEC on July 17, 2013.
10.24
Legend Oil and Gas, Ltd. 2013 Stock Incentive Plan
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015, filed with the SEC on September 9, 2013.
Exhibit
No.
Description
Location
10.25
Securities Purchase Agreement dated April 2, 2015, between the Company and Hillair Capital Investments, L.P.
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
10.26
Secured Promissory Note dated April 3, 2015, issued by the Company to Sher Trucking, LLC
Incorporated by reference herein from our report on Form 8-K dated April 2, 2015 and filed with the SEC on April 7, 2015.
10.27
Securities Purchase Agreement dated April 28, 2015
Incorporated by reference herein from our report on Form 10-K for the period ending April 25, 2015, and filed with the SEC on April 29, 2015.
10.28
Securities Purchase Agreement dated June 30, 2015.
Incorporated by reference herein from our report on Form 8-K dated June 30, 2015 and filed with the SEC on July 6, 2015.
10.29
Securities Purchase Agreement dated October 21, 2015.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.30
Securities Agreement dated October 21, 2015, between the Company and Hillair Capital Investments, L.P.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.31
Purchase and Sale Agreement dated October 28, 2015, between the Company and HPH Kansas LLC.
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.32
Assignment of Oil And Gas Lease and Bill Of Sale
Incorporated by reference herein from our report on Form 8-K dated October 22, 2015 and filed with the SEC on October 28, 2015.
10.33
Letter Agreement dated November 16, 2015, between the Company and Northpoint Energy Partners, LLC, with respect to the engagement of Andrew Reckles as Chairman and Chief Executive Officer of the Company
Incorporated by reference herein from our report on Form 10-Q dated September 30, 2011 and filed with the SEC on November 20, 2015.
10.34
Letter Agreement dated November 16, 2015, between the Company and Binderman Group, LLC, with respect to the engagement of Warren S. Binderman as President, Chief Financial Officer and Board Secretary/Treasurer of the Company.
Incorporated by reference herein from our report on Form 10-Q dated September 30, 2011 and filed with the SEC on November 20, 2015.
10.35
Securities Purchase Agreement dated January 29, 2016.
Incorporated by reference herein from our report on Form 8-K dated January 29, 2016 and filed with the SEC on February 2, 2016.
10.36
Securities Purchase Agreement dated March 25, 2016.
Incorporated by reference herein from our report on Form 8-K dated March 25, 2016 and filed with the SEC on March 31, 2016.
10.37
Securities Purchase Agreement dated May 27, 2016.
Incorporated by reference herein from our report on Form 8-K dated May 27, 2016 and filed with the SEC on June 3, 2016.
10.38
Securities Purchase Agreement dated July 5, 2016.
Incorporated by reference herein from our report on Form 8-K dated July 5, 2016 and filed with the SEC on July 7, 2016.
10.39
Securities Purchase Agreement dated July 27, 2016.
Incorporated by reference herein from our report on Form 8-K dated July 27, 2016 and filed with the SEC on August 1, 2016.
10.40
Securities Purchase Agreement dated August 22, 2016.
Incorporated by reference herein from our report on Form 8-K dated August 22, 2016 and filed with the SEC on August 23, 2016.
10.41
Securities Purchase Agreement dated September 30, 2016.
Incorporated by reference herein from our report on Form 8-K dated September 30, 2016 and filed with the SEC on October 6, 2016.
10.42
Securities Purchase Agreement dated October 27, 2016.
Incorporated by reference herein from our report on Form 8-K dated October 27, 2016 and filed with the SEC on November 2, 2016.
10.43
Securities Purchase Agreement dated November 29, 2016.
Incorporated by reference herein from our report on Form 8-K dated November 29, 2016 and filed with the SEC on December 2, 2016.
10.44
Amended and Restated Secured Promissory Note payable to Sher Trucking, LLC
Incorporated by reference herein from our report on Form 10-K for the period ending December 31, 2016, and filed with the SEC on April 7, 2016.
14.1
Code of Ethics
Incorporated by reference herein from our report on Form 8-K dated March 25, 2016 and filed with the SEC on March 31, 2016.
21.1
Subsidiaries
Filed herewith
*
Management contract or compensatory plan or arrangement.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.