Item 3.02 – Unregistered Sales of Equity Securities.
As of February 25, 2022, Alpha Energy, Inc., (the “Company”) entered into a series of agreements (“Contractual Investment Agreements”) by which $906,750 of indebtedness due and owing to Jay Leaver, the Company’s President, and $413,206 owed to AEI Management, Inc. (“AEI”), was converted into 7.25% Senior Secured Convertible Notes due February 24, 2024 of the Company (the “7.25% Notes”). The Contractual Investment Agreements contain customary representations, warranties and covenants for a transaction of this nature.
The 7.25% Notes are initially convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a conversion price of $5.00 per share. The conversion price is subject to adjustment in the event of certain events, including stock splits and dividends. The 7.25% Notes mature February 24, 2024, and bear interest at a rate of 7.25% per annum, payable quarterly. Under the terms of the 7.25% Notes an Event of Default shall occur upon the occurrence of a default in the payment of principal when due and payable, breach of any material term under the 7.25% Notes or the Security Agreement executed in connection therewith, entry of a court or other order unstayed for 60 days in which an involuntary proceeding under applicable bankruptcy, insolvency, reorganization or adjudging the Company to be insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition remains unstayed for 60 consecutive days, a decree or order appointing any person or entity to act as custodian, conservator, receiver, liquidator, assignee, trust or other similar official of the Company or over the property of the Company, or ordering the liquidation or winding up of the affairs of the Company that remains unstayed for 60 consecutive days, or the commencement by the Company of a voluntary proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law seeking to be adjudicated insolvent or consent to such similar relief. The 7.25% Notes contain limitations on the holder’s ability to convert the 7.25% Notes in the event such conversion causes the holder to beneficially own in excess of 4.99% of the Company’s issued and outstanding Common Stock.
Under the terms of the Pledge and Security Agreement and Mortgage Agreement with each holder of 7.25% Notes, the Company agreed to grant a lien and security interest and mortgage for all debts, obligations and liabilities of the Company in and to all assets obtained by the Company under that certain Purchase and Sale Agreement dated as of March 17 , 2022 by and between the Company and Progressive Well Service, LLC and to grant a mortgage with respect to such assets to the holders.
On August 18, 2022, the Company closed on the sale of $1,729,390 shares of Common Stock at $1.00 per share. Prior to 2022, the Company also closed on the sale of 259,000 shares of Common Stock at $1.00 per share. The sales were made exclusively to accredited investors under the terms of Subscription Agreements dated as of the closing date and had previously been reported by the Company and accounted for as a “Subscription Liability” of the Company.
The foregoing is a summary description of the terms and conditions of the Contractual Investment Agreements, 7.25 % Notes, Pledge and Security Agreement and Mortgage Agreement and does not purport to be complete and is qualified in its entirety by reference to the Contractual Investment Agreements filed as Exhibit 10.1 and 10.2 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2022 filed with the SEC on July 29, 2022, and Form of Senior Secured Note and Form of Senior Secured CIA (including Exhibit A form of “Pledge and Security Agreement” and Exhibit F form of “Mortgage” annexed thereto) and form of Subscription Agreement (common stock) filed as Exhibit 10.3, 10.4 and 10.5, respectively, to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 4, 2022.