Business Context and Reporting Period
This Form 8-K is filed by Blast Energy Services, Inc. (the "Company") on June 28, 2012, reporting events occurring on June 26 and June 27, 2012. The filing details the execution of a Debt Conversion Agreement and a resulting change in control of the Company. The Company is a Texas corporation engaged in energy services, currently undergoing a reorganization involving Pacific Energy Development Corp. ("PEDCO").
Key Financial Metrics and Capital Structure
- Debt Extinguished: Total principal and accrued interest of $1,636,253 was extinguished on June 27, 2012.
- Equity Issuance: 81,812,650 shares of common stock were issued to settle the debt.
- Conversion Price: Shares were issued at $0.02 per share.
- Dilution Impact: The issued shares represent 49% of the total outstanding shares of common stock (167,088,555 shares on an as-converted basis).
- Liquidity: The transaction eliminated specific debt obligations without a cash outflow.
Material Changes Versus Prior Period
The most significant change reported is the conversion of debt held by Berg McAfee Companies, LLC ("BMC") and Clyde Berg ("Berg") into equity. Specifically:
- BMC Note: $1,508,553 of principal and interest converted into 75,427,650 shares.
- Berg Note: $127,700 of principal and interest converted into 6,385,000 shares.
- Control Shift: The issuance resulted in a change of control. Eric A. McAfee now beneficially owns 57% of outstanding common stock, and Clyde Berg owns 60%. Collectively, they own 67% of the outstanding common stock (including preferred stock on an as-converted basis).
Guidance, Outlook, and Corporate Actions
The Company has called a Special Meeting of shareholders scheduled for July 27, 2012, with a record date of June 27, 2012. The meeting will vote on:
- Approval of the Merger Agreement with PEDCO.
- Approval of the amended and restated certificate of formation and designations.
- Other matters detailed in the Proxy Statement.
Risks and Contingencies: The Company claims an exemption from registration under Section 4(2) of the Securities Act of 1933, asserting the issuance was a private placement to accredited investors. The filing notes that a Definitive Proxy Statement will be filed subsequently containing further material information.
Investor Verification Checklist
- Verify the terms of the Merger Agreement with PEDCO and the status of the merger closing.
- Review the Definitive Proxy Statement for details on the amended certificate of formation and voting rights.
- Confirm the voting agreement between Eric A. McAfee and Clyde Berg regarding the 67% collective ownership.
- Assess the impact of the 49% equity dilution on existing shareholders' ownership percentages.
- Check for any subsequent filings regarding the outcome of the Special Meeting scheduled for July 27, 2012.