SEC Form 4 · accession 0001214782-15-000156
HYDROCARB ENERGY CORP · HECC
Statement of changes in beneficial ownership, as filed. Original on EDGAR ↗
Reporting owner
Kent Watts
Officer — Chief Executive Officer · Director · 10% Owner
Period of report
Aug 26, 2015
Accepted (ET)
Sep 25, 2015 · 2:13 pm EDT
Rule 10b5-1 plan
unknown — predates the checkbox
Issuer CIK
0001425808
Table I — non-derivative securities
| Security | Date | Code | Shares | Price | A/D | Owned after | D/I | Nature of ownership |
|---|---|---|---|---|---|---|---|---|
| Common StockF1,F2 | Aug 27, 2015 | S | 499,997 | $0.50 | D | 5,113,619 | D | |
| Common StockF1,F2 | Sep 8, 2015 | S | 166,666 | $0.50 | D | 4,946,953 | D | |
| Common StockF1,F2 | Sep 16, 2015 | S | 50,000 | $0.50 | D | 4,896,953 | D | |
| Common StockF1,F2 | Sep 17, 2015 | S | 513,335 | $0.50 | D | 4,383,618 | D | |
| Common StockF1,F2 | Sep 21, 2015 | S | 66,667 | $0.50 | D | 4,316,951 | D | |
| Common StockF6 | Sep 21, 2015 | J | 50,000 | — | D | 4,266,951 | D |
Table II — derivative securities
| Security | Conv. / exercise price | Date | Code | Shares | A/D | Exercisable | Expires | Underlying | Underlying shares | Owned after | D/I |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Convertible Subordinated PromissoryF3,F4 | $0.75 | Sep 14, 2015 | J | 1 | A | Sep 14, 2015 | Sep 14, 2018 | Common Stock | 466,667 | 1 | D |
| Convertible Subordinated PromissoryF5,F4 | $0.75 | Sep 17, 2015 | J | 1 | A | Sep 17, 2015 | Sep 17, 2018 | Common Stock | 222,223 | 1 | D |
| Convertible Subordinated PromissoryF6,F7 | $4.00 | Sep 21, 2015 | J | 1 | D | Jun 10, 2015 | Jun 10, 2018 | Series B Preferred Stock | 50,000 | 1 | D |
Explanation of responses
- F1In August and September 2015, Mr. Watts sold an aggregate of 1,296,665 shares of restricted common stock which he held to thirteen purchasers in private transactions for $0.50 per share ($648,333 in aggregate). A closing condition to the sale was that Mr. Watts enter into the voting agreement described in footnote (2) below and that Mr. Watts use the funds received to purchase units as described in footnote (3) below.
- F2On or around August 25, 2015, Mr. Watts entered into a voting agreement in favor of S. Chris Herndon, a member of the Board of Directors of the Registrant. Pursuant to the voting agreement, Mr. Watts provided Mr. Herndon a voting proxy to vote all of the shares of common stock which Mr. Watts owns or may acquire in the future, to vote to elect or remove (as applicable) 66.6% of members of the Registrant's Board of Directors on any stockholder vote (i.e., 2 out of 3 directors). The voting agreement was to become effective, only if Mr. Watts sold $1 million in securities in private transactions on similar terms as described above before September 21, 2015, which transactions did not occur, and which voting agreement has subsequently terminated with no force or effect.
- F3On September 14, 2015, Mr. Watts subscribed for $350,000 in Convertible Subordinated Promissory Notes.
- F4All principal and accrued interest on the Convertible Subordinated Promissory Notes is convertible into common stock at a conversion price of $0.75 per share at any time. Additionally, the Registrant may force the conversion of the Convertible Subordinated Promissory Notes into common stock in the event the trading price of the Registrant's common stock is equal to at least $5.00 per share for at least 20 out of any 30 consecutive trading days. Any shares of common stock issuable upon conversion of the Convertible Subordinated Promissory Notes are subject to a lock-up whereby no shares of common stock can be sold until January 1, 2016, and no more than 2,500 shares of common stock can be sold per day thereafter until the Registrant's common stock is listed on the NASDAQ or NYSE market or the trading volume of the Registrant's common stock is in excess of 100,000 shares per day.
- F5On September 17, 2015, Mr. Watts subscribed for $166,667 in Convertible Subordinated Promissory Notes.
- F6On September 21, 2015, Mr. Watts and the Registrant entered into a First Amendment to Exchange Agreement, which amended the Exchange Agreement dated June 10, 2015. Pursuant to the original terms of the Exchange Agreement, Mr. Watts exchanged 8,188 shares of Series A 7% Convertible Voting Preferred Stock, and accrued and unpaid dividends, assuming such Series A 7% Convertible Voting Preferred Stock was correctly designated and issued, into 32 units, each consisting of (a) 25,000 shares of the restricted common stock of the Registrant; and (b) $100,000 in face amount of Convertible Subordinated Promissory Notes. Mr. Watts received an aggregate of 800,000 shares of common stock and a Convertible Promissory Note with an aggregate principal amount of $3.2 million and a maturity date of June 10, 2018 in connection with the Exchange Agreement. The First Amendment reduced the total Units due to Mr. Watts to 30 units.
- F7Among other terms, all principal and accrued interest on the Notes are convertible at the option of the holder into common stock of the Registrant at $4 per share. Additionally, at such time as the Registrant has filed a designation of Series B Convertible Preferred Stock with the Secretary of State of Nevada, the Notes, and any and all accrued and unpaid interest thereon, automatically converts into shares of Series B Convertible Preferred Stock of the Registrant at a conversion price of $1,000 per share (with any remaining amount payable in cash at the time of conversion). The terms of the Notes and Series B Convertible Preferred Stock are described in greater detail in the Form 8-K filed by the Registrant with the SEC on June 19, 2015.