S-1/A: Permex Petroleum Seeks to Resell Shares Upon Conversion of Debentures and Exercise of Warrants

Permex Petroleum aims to register for resale up to 4,699,394 common shares related to convertible debentures and purchase warrants issued in a private placement.

Summary

• Permex Petroleum Corporation is filing an amendment to its Form S-1 registration statement to allow selling shareholders to resell up to 4,699,394 common shares.
• These shares consist of up to 2,462,843 shares issuable upon conversion of 10% senior secured convertible debentures with a principal amount of $4,276,389, plus interest, at a conversion price of $1.91.
• The shares also include up to 2,236,551 shares issuable upon exercise of purchase warrants at an exercise price of $1.91 per share.
• The company will not receive any proceeds from the sale of resale shares by the selling shareholders, except for approximately $4.3 million if all warrants are exercised for cash.
• The company's common shares are listed on the Canadian Securities Exchange (CSE) under the symbol OIL and the Frankfurt Stock Exchange under the symbol 75P.
• As of February 24, 2025, the closing price of Permex's common shares on the CSE was CAD$4.10, equivalent to approximately $2.89 per share based on the exchange rate on February 21, 2025.
• The company is an emerging growth company and a smaller reporting company, which allows it to take advantage of certain reduced reporting requirements.
• MKM Engineering has consented to the use of their appraisal reports regarding Permex's oil and gas interests in the registration statement.

Sentiment

Score: 4

Explanation: The document contains both positive and negative elements. The potential for additional capital through warrant exercises is a positive, but the company's financial losses, limited market, and going concern uncertainty weigh negatively.

Positives

• The company may receive approximately $4.3 million if all warrants are exercised for cash, which would be used for working capital and capital expenditures.
• MKM Engineering has consented to the use of their appraisal reports regarding Permex's oil and gas interests in the registration statement.

Negatives

• The company will not receive any proceeds from the sale of resale shares by the selling shareholders.
• There is currently a limited U.S. public market for the company's common shares, and the stock price may be volatile.
• The company's common shares will not be eligible for proprietary broker-dealer quotations on the OTC Pink Sheets until a new Form 211 is filed with and cleared by FINRA.
• The company has a limited operating history and has incurred losses and has an accumulated deficit of $18,018,373 as of December 31, 2024.
• The company's independent registered public accounting firm has expressed substantial doubt about the company's ability to continue as a going concern.

Risks

• The selling shareholders may choose to sell the warrant shares and the conversion shares at prices below the current market price.
• A large number of common shares may be sold in the market following this offering, which may significantly depress the market price of the company's common shares.
• The company will have broad discretion as to the proceeds that it receives from the cash exercise by any holder of the warrants, and it may not use the proceeds effectively.
• You may experience future dilution as a result of issuance of the warrant shares and conversion shares, future equity offerings by us and other issuances of our common shares or other securities.
• There is currently a limited U.S. public market for our Common Shares, the stock price of our Common Shares may be volatile or may decline regardless of our operating performance and you may not be able to resell your Common Shares at or above the price you acquired such Common Shares.
• The company has issued convertible debentures, options and warrants and may continue to issue additional securities in the future.
• Our principal shareholders and management own a significant percentage of our shares and may be able to exert significant control over matters subject to shareholder approval.
• We are a British Columbia company and it may be difficult for you to enforce judgments against us or certain of our directors or officers.

Future Outlook

Management expects to restart its drilling and development program in the first quarter of 2025, subject to receipt of additional funding.

Industry Context

The document relates to the oil and gas industry, specifically focusing on exploration, development, and production activities within the Permian Basin. The industry is subject to volatile commodity prices, regulatory changes, and increasing scrutiny regarding environmental impact.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• However, the company's reliance on independent engineering firms for reserve estimates is a common practice in the oil and gas industry.
• The company's focus on acquiring producing assets at a discount and increasing production through recompletion and re-entries is a strategy employed by many smaller oil and gas companies.
• The company's concentration in the Permian Basin is a common strategy for companies seeking to capitalize on the regions prolific oil and gas resources.
• The company's status as an emerging growth company and smaller reporting company is also common for smaller oil and gas companies.

Management Changes

Legal Proceedings

• Atlas Tubular, LLC filed a suit against the Company on October 10, 2023, seeking damages of at least $172,981 for unpaid invoices.
• Foundation Energy Services, LLC filed a suit against the Company on September 7, 2023, seeking damages of at least $66,074 for unpaid invoices.
• Premier Energy Services, LLC filed a suit against the Company on August 7, 2023, seeking damages of at least $104,205 for unpaid invoices.
• BJ Pipe & Supply LLC filed a suit against the Company on September 11, 2024, seeking damages of at least $75,951 for unpaid invoices.
• Hudson Pumping Inc. filed a suit against the Company on December 2, 2024, seeking damages of at least $60,050 for unpaid invoices.
• Cudd Energy Services, Inc. filed a suit against the Company and Mehran Ehsan on July 17, 2024, seeking damages of at least $130,224 for unpaid invoices.
• R&B Oilfield Services, LLC filed a suit against the Company on November 6, 2024, seeking damages of at least $36,020 for unpaid invoices.
• Q2 Artificial Lift Services (SOA) Inc. filed a suit against the Company on February 5, 2024, seeking damages of at least $125,102 for unpaid invoices.

Related Party Transactions

• The Company entered into an employment agreement with Bradley Taillon, the Companys Chief Executive Officer, on April 29, 2024, for an annual base salary of base salary of $ 250,000 , which shall be reviewed by the Company annually.
• The Company had an employment agreement with Mehran Ehsan, the former Chief Executive Officer of the Company, for an annual base salary of $ 250,000 , with no specified term.
• On August 30, 2024, we entered into a Separation Agreement with Mehran Ehsan, the Companys former Chief Executive Officer, until April 29, 2024 and Vice President of Business Development, until August 30, 2024.
• On May 1, 2022, the Company entered into an employment agreement with Gregory Montgomery, the Companys Chief Financial Officer, for an annual base salary of $ 50,000 , with no specified term.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of shares upon conversion of debentures and exercise of warrants.
• The company's ability to continue as a going concern is dependent on its ability to obtain additional financing, which could impact stakeholders.
• The company's operations are subject to environmental regulations, which could impact stakeholders.

Next Steps

• The company intends to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the selling shareholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current public information requirement under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.

Key Dates