U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 20, 2006
TIDELANDS OIL & GAS CORPORATION
(Exact Name of registrant as specified in its Charter)
Nevada 0-29613 66-0549380
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State of Incorporation Commission File No. I.R.S. Employer
Identification No.
1862 West Bitters Rd. San Antonio, TX 78248
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, ( 210 ) 764 - 8642
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(Registrant's former name and address)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions below:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17CFR 240-14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240-13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Qualification of Contents of the Transaction Summary:
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The following paragraphs contain a limited summary of the principal
terms of financing transactions with several investors. The summary is qualified
in its entirety by the terms and conditions of the forms of definitive
transaction documents which are attached to this report. These forms of
documents should be read in their entirety to gain a complete understanding of
the details of the transactions. We have included the following forms of
transaction documents as exhibits to this Report: the Securities Purchase
Agreement, the Original Issue Discount Convertible Debenture, the Registration
Rights Agreement, the Series A Common Stock Purchase Warrant and Series B Common
Stock Purchase Warrant ("Transaction Documents"). Each investor executed these
documents.
Stock Purchase Agreement:
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On January 20, 2006, Tidelands Oil & Gas Corporation ("Company")
entered into Securities Purchase Agreements with seven accredited
investors(collectively, "Purchasers or Holders"). We sold $6,569,750 Dollars, in
the aggregate principal amount, of discounted convertible
debentures("Debentures") and Series A and Series B Warrants to purchase common
stock ("Warrants") for an aggregate payment of $5,396,098 after deduction for
the interest discount. We paid an 8% commission to the placement agent, HPC
Capital Management, LLC., a registered broker-dealer. We granted HPC Capital
Management Series A Common Stock Purchase Warrants as additional transaction
compensation. The investors have escrowed the aggregate payments. To date we
have received apporximately $3,000,000. We anticipate the balance of the
escrowed funds to be released in the near future. We intend to use the proceeds
for working capital.
The sale of these securities requires the Company to increase its
authorized common stock capital because we have insufficient authorized capital
to comply with all of the Debenture conversion and Warrant exercise provisions
contained in the Transaction Documents. We have reserved 9,000,000 common shares
of our unissued authorized common stock capital for the transaction. After we
take the necessary corporate action to increase our common stock capital, we
will reserve enough shares to comply with the Transaction Documents.
We have also agreed to file a registration statement on Form SB-2 with
the U.S. Securities and Exchange Commission ("SEC") to register the common stock
underlying the Debentures and Warrants.
We sold these securities in an exempt transaction under the Securities
Act of 1933,(the "Act") as amended, pursuant to Section 4(2) and Regulation D
Rule 506. These are restricted securities and may not be resold without
registration under the Act or an exemption from the registration requirements of
the Act.
Debentures:
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The Debentures are Original Issue Discount Convertible Debentures with
an aggregate face amount of $6,569,750. The purchasers paid an aggregate
principal sum of $5,396,098. The face amount of the Debentures is due January
20, 2008. The difference between the face amount and the aggregate principal
paid represents the interest expense. The Debenture Holder may convert all or
part of the Debenture face amount into shares of Tidelands common stock at any
time at an initial conversion rate of $0.87 per share.
The Purchasers have agreed to restrict their ability to convert their
Debentures or Exercise their Warrants and receive our shares such that the
number of shares of common stock held by each of them individually in the
aggregate after such conversion or exercise does not exceed 4.99% of the then
issued and outstanding Company common shares. This beneficial ownership
limitation may be waived by the Holder.
Subject to specific terms and conditions in the Debenture, the Company
has the option to force conversion of the Debentures into common shares if the
Company's share price as quoted on the Over-the-Counter Electronic Bulletin
Board exceeds 250% of the then Conversion Price for a period of time based on a
Volume Weighted Average Price (VWAP) formula. The VWAP share price must exceed
this 250% price for at least 20 consecutive Trading Days.
In addition to other default provisions contained in Section 8 of the
Debenture, we must increase our authorized common stock capital on, or before
the 90th day following the Debenture original issue date. Failure to increase
our common stock capital will trigger a default which includes, but is not
limited to acceleration of the Debentures, at the Holder's option and liquidated
damages.
In connection with the financing transactions described in Item 1.01
above, the Company must increase its authorized common stock capital because
presently there is insufficient unissued authorized common stock capital to meet
the potential debenture conversion and warrant exercise provisions outlined in
the transaction documents.
The conversion price will be subject to adjustment for corporate
events, such as stock splits, stock dividends, and stock combinations, as more
specifically outlined in the transaction documents.
Series A Common Stock Purchase Warrants:
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We granted the Purchasers Series A Common Stock Purchase Warrants
(Series A Warrants) to purchase 2,491,974 shares of our common stock at $0.935
per share. We also granted HPC Capital Management 65,697 Series A Common
Warrants to purchase our common stock at $0.935 per share.
The Series A Warrants may be exercised immediately by the Purchasers
and terminate on January 20, 2009.
Subject to specific terms and conditions in the Series A Warrant
including an effective registration statement registering underlying shares, the
Company has the call option to force conversion of this Warrant into common
shares if the Company's share price as quoted on the Over-the-Counter Electronic
Bulletin Board exceeds 250% of the then effective Exercise Price for a period of
time based on a Volume Weighted Average Price (VWAP) formula. The VWAP share
price must exceed this 250% threshold price for at least 20 consecutive Trading
Days.
If at any time after one year from the date of issuance there is no
effective registration statement registering, or no current prospectus available
for the resale of the underlying shares, then this Warrant may also be exercised
by means of "cashless exercise" as determined by a formula described in the
Warrant.
The exercise price will be subject to adjustment for corporate events,
such as stock splits, stock dividends, and stock combinations, as more
specifically outlined in the transaction documents.
Series B Common Stock Purchase Warrants:
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We granted the Purchasers Series B Common Stock Purchase Warrants
("Series B Warrants") to purchase 7,551,432 shares of our common stock at $1.275
per share. The Purchasers have the right to exercise the Series B Warrants
commencing at any time on, or after January 20, 2007 and on, or before February
19, 2007.
Subject to specific terms and conditions in the Series B Warrant,
including an effective registration statement registering underlying shares, the
Company has the option to force the exercise of this Warrant into common shares
if the Company's share price as quoted on the Over-the-Counter Electronic
Bulletin Board exceeds 150% of the then effective Exercise Price for a period of
time based on a Volume Weighted Average Price (VWAP) formula. The VWAP share
price must exceed this 150% threshold price for at least 20 consecutive Trading
Days.
If at any time after one year from the date of issuance there is no
effective registration statement registering, or no current prospectus available
for the resale of the underlying shares, then this Warrant may also be exercised
by means of "cashless exercise" as determined by a formula described in the
Warrant.
The exercise price will be subject to adjustment for corporate events,
such as stock splits, stock dividends, and stock combinations, as more
specifically outlined in the transaction documents.
Registration Rights
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We have granted the Purchasers and HPC Capital Management registration
rights on the shares underlying the Debentures and the Warrants. The Common
Stock underlying the Debentures and Warrants will be registered under the
Securities Act of 1933, as amended, for re-offer and re-sale by the Purchasers
and HPC Capital Management. If the Company fails to timely file a registration
statement or is unable to have the registration statement declared effective by
the SEC within the stated periods of time, we will trigger a default and be
subject to among other things, acceleration of the Debentures, at the
Purchasers' options, additional default interest payment and monetary liquidated
damages. The liquidated damages will be capped at 20% of the Debentures face
amounts.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off Balance Sheet Arrangement of a Registrant.
(See Item 1.01 above)
Item 3.02 Unregistered Sales of Equity Securities
(See Item 1.01 above)
Item 7.01 Regulation FD Disclosure
On January 24, 2005, Tidelands Oil & Gas Corporation announced the
private placement of $6,569,750 of debt securities and warrants with several
institutional investors referenced above in Item 1.01. A copy of the news
release is attached as Exhibit 99.
Limitation on Incorporation by Reference
In accordance with General Instruction B.2 of Form 8-K, the information
set forth in this Item 7.01 will not be deemed to be "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, (the "Exchange
Act"), or otherwise subject to the liabilities of that section, nor will such
information be deemed incorporated by reference in any filing under the
Securities Act or the Exchange Act, except as will be expressly set forth by
specific reference in such a filing. The information set forth in this Item 7.01
will not be deemed an admission of materiality of any information in this report
on Form 8-K that is required to be disclosed solely to satisfy the requirements
of Regulation FD.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Item Number Description
10.1 Form of Securities Purchase Agreement
10.2 Form of Original Issue Discount Convertible Debenture
10.3 Form of Registration Rights Agreement
10.4 Series A Common Stock Purchase Warrant
10.5 Series B Common Stock Purchase Warrant
99 Press Release dated January 24, 2006
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TIDELANDS OIL & GAS CORPORATION
Dated: January 24, 2006
/s/James B. Smith
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By: James B. Smith
Title: Sr. V.P. President, CFO