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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2021

 

Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from __________ to __________

 

Commission File Number: 000-52690

 

PETROLIA ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

 

Texas   86-1061005

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

710 N. Post Oak Road, Suite 400

Houston, Texas

  77024
(Address of principal executive offices)   (Zip Code)

 

(832-723-1266)

(Issuer’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No

 

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer Smaller Reporting Company
   
Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 176,988,322 shares of common stock as of June 15, 2022.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
Part I Financial Information  
     
Item 1. Consolidated Financial Statements 3
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3 Quantitative and Qualitative Disclosures about Market Risk 23
     
Item 4. Controls and Procedures 23
     
Part II Other Information  
     
Item 1 Legal Proceedings 24
     
Item 1A. Risk Factors 25
     
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 25
     
Item 3 Defaults Upon Senior Securities 25
     
Item 4 Mine Safety Disclosures 25
     
Item 5 Other Information 25
     
Item 6. Exhibit Index 25
     
SIGNATURES 26
     
EXHIBITS 27

 

2
 

 

PART I: Financial Information

 

Item 1. Consolidated Financial Statements

 

PETROLIA ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31, 2021   December 31, 2020 
   (unaudited)   (audited) 
ASSETS          
Current assets          
Cash  $98,268   $155,045 
Accounts receivable   451,239    5,000 
Other current assets   39,443    39,443 
Total current assets   588,950    199,488 
           
Property & equipment          
Oil and gas, on the basis of full cost accounting          
Evaluated properties   8,673,423    8,619,427 
Furniture, equipment & software   201,110    201,110 
Less accumulated depreciation and depletion   (3,085,709)   (2,868,453)
Net property and equipment   5,788,824    5,952,084 
           
Other assets          
Operating lease right-of-use asset   20,612    23,145 
Other assets   997,516    985,187 
           
Total Assets  $7,395,902   $7,159,904 
           
LIABILITIES & STOCKHOLDERS DEFICIT          
           
Current liabilities          
Accounts payable  $1,102,076   $1,067,841 
Accounts payable – related parties       587 
Operating lease liability – current   11,028    13,107 
Accrued liabilities   761,879    1,572,055 
Accrued liabilities – related parties   738,757    751,949 
Notes payable, current portion   3,239,546    3,037,737 
Notes payable – related parties, current portion   950,516    1,035,329 
Total current liabilities   6,803,802    7,478,605 
           
Asset retirement obligations   3,746,828    3,624,133 
Notes payable, net of current portion       573 
Operating lease liability   13,718    13,909 
Derivative liability   371,514    183,798 
Total Liabilities  $10,935,862   $11,301,018 
           
Stockholders’ Deficit          
Preferred stock, $0.001 par value, 1,000,000 shares authorized;
199,100 shares issued and outstanding
  $199   $199 
Common stock, $0.001 par value; 400,000,000 shares authorized; 176,988,322 and 168,696,226 shares issued and outstanding   176,988    168,696 
Additional paid in capital   

60,082,160

   59,044,519 
Shares to be issued        
Accumulated other comprehensive income   (264,105)   (266,432)
Accumulated deficit   (63,535,202)   (63,088,096)
Total Stockholders’ Deficit   (3,539,960)   (4,141,114)
           
Total Liabilities and Stockholders’ Deficit  $7,395,902   $7,159,904 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

3
 

 

PETROLIA ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

   Three months ended March 31, 2021   Three month ended March 31, 2020 
Oil and gas sales          
Oil and gas sales  $1,082,248   $481,121 
Total Revenue   1,082,248    481,121 
           
Operating expenses          
Lease operating expense   535,393    603,249 
Production tax   1,163    678 
General and administrative expenses   331,014    245,263 
Depreciation, depletion and amortization   183,139    302,378 
Asset retirement obligation accretion   88,206    48,945 
Total operating expenses   1,138,915    1,200,693 
           
Loss from operations   (56,667)   (719,572)
           
Other income (expenses)          
Interest expense   (158,048)   (185,813)
Other income       407 
Change in fair value of derivative liabilities   (187,716)   (126,675)
Total other income (expenses)   (345,764)   (312,081)
Net loss before taxes   (402,431)   (1,031,653)
           
Series A Preferred Dividends   (44,675)   (44,675)
           
Net loss attributable to common stockholders   (447,106)   (1,076,328)
           
Income (loss) per share          
(Basic & diluted)   0.00    (0.01)
           
Weighted average number of common shares outstanding, basic & diluted   170,685,245    165,140,155)
           
Other comprehensive income, net of tax          
Foreign currency translation adjustments   2,327    (127,548)
Comprehensive income (loss)   (444,779)   (1,203,876)

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

4
 

 

PETROLIA ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

 

                                     
                   Additional   Shares   Accumulated other       Stockholders’ 
   Preferred stock   Common stock   paid-in   to be   comprehensive   Accumulated   equity 
   Shares   Amount   Shares   Amount   capital   issued   income   deficit   (deficit) 
Balance at December 31, 2019   199,100   $199    164,548,726   $164,549   $57985,359   $55,375   $(281,565)  $(52,600,378)  $  5,386,539 
                                              
Stock-based compensation                   67,193                67,193 
Common shares issued           591,250    591    54,784    (55,375)            
Series A preferred dividends                               (44,675)   (44,675)
Warrants issued as financing fees                   7,234                7,234 
Shares for conversion of related party debt           156,250    156    12,344                12,500 
Warrants issued with loans                   332,881                332,881 
Stock to be issued       -                 69,375            69,375 
Other comprehensive income (loss)                           (127,548)       (127,548)
Net loss                               (1,031,653)   (1,031,653)
Balance at March 31, 2020   199,100   $199    165,296,226   $165,296   $58,459,795   $69,375   $(346,113)  $(53,676,706)  $4,671,846 
                                              
Balance at December 31, 2020   199,100   $199    168,696,226   $168,696   $59,044,519   $   $(266,432)  $(63,088,096)  $(4,141,114)
                                              
Stock-based compensation                   27,369                27,369 
Series A preferred dividends                               (44,675)   (44,675)
Warrants issed as financing fee                   9,252                9,252 
Common shares issued for conversion of debt           2,700,000    2,700    86,400                89,100 
Common shares issued for settlement of related party fee           5,592,096    5,592    158,895            

   

164,487

Warrants issued for settlement of loans                   200,378                200,378 

Gain on modification of related party debt

                   181,791                181,791 
Gain on issuance of shares for settlement of accrued related party fees                   

373,556

                

373,556

 
Other comprehensive income (loss)                           2,327        2,327 
Net Income (loss)                               (402,431)   (402,431)
Balance at March 31, 2021   199,100   $199    176,988,322   $176,988   $60,082,160   $   $

(264,105

)  $

(63,535,202

)  $

(3,539,960

)

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

5
 

 

PETROLIA ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Three Months Ended March 31, 2021   Three Months Ended March 31, 2020 
Cash Flows from Operating Activities          
Net income (loss)  $(402,431)  $(1,031,653)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:          
Depletion, depreciation and amortization   183,139    302,378 
Asset retirement obligation accretion   88,206    48,945 
Operating lease   263     
Amortization of debt discount   63,007    49,594 
Change in fair value of derivative liabilities   187,716    126,675 
Stock-based compensation expense   27,369    67,193 
Warrants issued as financing fees   9,252    7,234 
Changes in operating assets and liabilities          
Accounts receivable   (446,238)   (12,701)
Other current assets       (19,438)
Accounts payable   24,483    29,601 
Accounts payable – related parties   (587)    
Accrued liabilities   

(112,776

)   166,627 
Accrued liabilities – related parties   331,640    25,685 
Net cash flows from operating activities   

(46,957

)   (239,860)
           
Cash Flows from Investing Activities          
Escrow for property purchase       1,374,353)
Cash flows from investing activities       (1,374,353)
           
Cash Flows from Financing Activities          
Proceeds from notes payable       1,418,934 
Repayments on notes payable   (1,926)   (1,836)
Proceeds from related party notes payable       200,000 
Repayments on related party notes payable   (10,221)   (33,799)
Shares to be issued       69,375 
Cash flows from financing activities   (12,147)   1,652,674 
           
Changes in foreign exchange rate   2,327    (59,680)
           
Net change in cash   (56,777)   (21,219)
Cash at beginning of period   155,045    34,513 
Cash at end of period  $98,268   $13,294 

 

SUPPLEMENTAL DISCLOSURES

 

  

Three Months Ended

March 31, 2021

  

Three Months Ended

March 31, 2020

 
SUPPLEMENTAL DISCLOSURES          
Interest paid  $71,565   $ 
Income taxes paid        
NON-CASH INVESTING AND FINANCIAL DISCLOSURES          
Series A preferred dividends accrued   44,675    44,675 
Debt discount on warrant issue       332,881 
Conversion of related party debt and payables   527,520     
Settlement of notes payable related party for common shares   

135,000

    12,500 
Issuing of previous shares to be issued       55,375 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

6
 

 

PETROLIA ENERGY CORPORATION

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

 

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION:

 

Petrolia Energy Corporation (the “Company”) is in the business of oil and gas exploration, development and production.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for such interim periods are not necessarily indicative of operations for a full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the year ended December 31, 2020, as reported in Form 10-K, have been omitted.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Leases

 

Leases are classified as operating leases or financing leases based on the lease term and fair value associated with the lease. The assessment is done at lease commencement and reassessed only when a modification occurs that is not considered a separate contract.

 

Lessee arrangements

 

Where the Company is the lessee, leases classified as operating leases are recorded as lease liabilities based on the present value of minimum lease payments over the lease term, discounted using the lessor’s rate implicit in the lease or the Company’s incremental borrowing rate, if the lessor’s implicit rate is not readily determinable. The lease term includes all periods covered by renewal and termination options where the Company is reasonably certain to exercise the renewal options or not to exercise the termination options. Corresponding right-of-use assets are recognized consisting of the lease liabilities, initial direct costs and any lease incentive payments.

 

Lease liabilities are drawn down as lease payments are made and right-of-use assets are depreciated over the term of the lease. Operating lease expenses are recognized on a straight-line basis over the term of the lease, consisting of interest accrued on the lease liability and depreciation of the right-of-use asset, adjusted for changes in index-based variable lease payments in the period of change.

 

Lease payments on short-term operating leases with lease terms twelve months or less are expensed as incurred.

 

Fair Value of Financial Instruments

 

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2021, the amounts reported for cash, accrued interest and other expenses, notes payable, convertible notes, and derivative liability approximate the fair value because of their short maturities.

 

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

 

7
 

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The hierarchy is broken down into three levels based on the observability of inputs as follows:

 

  Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment;
  Level 2 — Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly; and
  Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2021 and December 31,2020.

 

March 31, 2021  Level 1   Level 2   Level 3   Total 
Derivative liabilities           371,514    371,514 
ARO liabilities           3,746,828    3,746,828 
                     
December 31, 2020                    
Derivative liabilities           183,798    183,798 
ARO liabilities           3,624,133    3,624,133 

 

NOTE 3. GOING CONCERN

 

The Company has suffered recurring losses from operations and currently has a working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to generate profits by reworking its existing oil or gas wells, as needed, funding permitting. The Company will need to raise funds through either the sale of its securities, issuance of corporate bonds, joint venture agreements and/or bank financing to accomplish its goals. The Company does not have any commitments or arrangements from any person to provide the Company with any additional capital.

 

If additional financing is not available when needed, we may need to cease operations. The Company may not be successful in raising the capital needed to drill and/or rework existing oil wells. Any additional wells that the Company may drill may be non-productive. Management believes that actions presently being taken to secure additional funding for the reworking of its existing infrastructure will provide the opportunity for the Company to continue as a going concern. Since the Company has an oil producing asset, its goal is to increase the production rate by optimizing its current infrastructure. The accompanying financial statements have been prepared assuming the Company will continue as a going concern; no adjustments to the financial statements have been made to account for this uncertainty.

 

8
 

 

NOTE 4. EVALUATED PROPERTIES

 

The Company’s current properties can be summarized as follows.

 

Cost  Canadian properties   United States properties   Total 
As of December 31, 2019  $2,563,434   $10,350,538   $12,913,972 
Additions   678,765        678,765 
Dispositions       (5,648,994)   (5,648,994)
Impairment of oil and gas properties       (396,922)   (396,922)
Asset retirement cost additions   906,146        906,146 
Foreign currency translation   166,460        166,460 
As of December 31, 2020  $4,314,805   $4,304,622   $8,619,427 
Foreign currency translations   53,996        53,996 
As of March 31, 2021  $4,368,801   $4,304,622   $8,673,423 
                
Accumulated depletion               
As of December 31, 2019   1,458,976    61,551    1,520,527 
Depletion   1,115,595        1,115,595 
Foreign currency translation   57,178        57,178 
As of December 31, 2020  $2,631,749   $61,551   $2,693,300 
Depletion   175,394        175,394 
Foreign currency translation   34,117        34,117 
As of March 31, 2021  $2,841,259   $61,551   $2,902,811 
                
Net book value as of December 31, 2020  $1,683,056   $4,243,071   $5,926,127 
Net book value as of March 31, 2021  $1,527,542   $4,234,071   $5,770,612 

 

On August 6, 2019, the Company entered into a Purchase and Sale Agreement (“PSA”) for the sale of the same NOACK property with Flowtex Energy LLC. (“FT”). The purchaser agreed to pay $400,000 for the NOACK Assets including a $20,000 deposit that was received on August 15, 2019 and the remaining balance of $380,000 to be received by September 30, 2019. By December 31, 2019, FT had made cumulative payments of $375,000, resulting in a $25,000 account receivable to the Company at March 31, 2021 which is included in other current assets. The $400,000 was recorded as a gain on sale of properties. On July 6, 2021, the remaining $25,000 accounts receivable was settled via the following. The purchaser remitted a cash payment of $8,995, as well as paying (on the Company’s behalf) $16,005 of outstanding property tax invoices previously incurred by the Company.

 

On May 01 2020, Petrolia Energy Corporation acquired a 50% working interest in approximately 28,000 net working interest acres located in the Utikuma Lake area in Alberta, Canada. The property is an oil-weighted asset currently producing approximately 525 bopd of light oil. The working interest was acquired from Blue Sky Resources Ltd. in an affiliated party transaction as Zel C. Khan, the Company’s former Chief Executive Officer, is related to the ownership of Blue Sky. Blue Sky acquired a 100% working interest in the Canadian Property from Vermilion Energy Inc. via Vermilion’s subsidiary Vermilion Resources. The effective date of the acquisition was May 1, 2020. The total purchase price of the property was $2,000,000 (CAD), with $1,000,000 of that total due initially. The additional $1,000,000 was contingent on the future price of WTI crude. At the time WTI price exceeded $50/bbl, the Company would pay an additional $750,000. In addition, at the time WTI price exceeded $57/bbl the Company would pay an additional $250,000 (for a cumulative contingent total of $1,000,000). Note that WTI crude prices did not exceed those price thresholds until 2021, so the contingent $1,000,000 will not be recorded until 2021. Included in the terms of the agreement, the Company also funded their portion of the Alberta Energy Regulator (“AER”) bond fund requirement ($607,357), necessary for the wells to continue in production after the acquisition. Additional funds ($390,159 USD) remain in the other current asset balance for future payments from BSR, related to the acquisition.

 

On July 27, 2020, the Company entered into a settlement agreement with their Trustee pursuant to which nine leases totaling approximately 3,800 acres of the 4,880-acre Twin Lakes San Andres Unit were forfeited as a part of the settlement agreement. Consequently, the Company no longer has the right to produce oil, gas, or other hydrocarbons and any other minerals from the mineral estate encumbered by the leases and owned by the Trustee. The company accounted for the forfeiture of the TLSAU properties, in accordance with Reg S-W.T.Rule 4-10(c)(6). Accordingly, an analysis of multi-period reserve reports was performed to determine the percentage of the cumulative US full cost pool’s reserves that were forfeited (56% or 943,820). Then that percentage was multiplied by the period end net property balance of $10,175,456. This resulted in a write down of $5,648,994 ($10,175,456 * 56%) of the US cost pool, which was recorded as part of operating expenses for the year ended December 31, 2020. Note that both TLSAU and SUDS make up the US full cost pool.

 

9
 

 

NOTE 5. LEASES

 

Our adoption of ASU 2016-02, Leases (Topic 842), and subsequent ASUs related to Topic 842, requires us to recognize substantially all leases on the balance sheet as an ROU asset and a corresponding lease liability. The new guidance also requires additional disclosures as detailed below. We adopted this standard on the effective date of January 1, 2019 and used this effective date as the date of initial application. Under this application method, we were not required to restate prior period financial information or provide Topic 842 disclosures for prior periods. We elected the ‘package of practical expedients,’ which permitted us to not reassess our prior conclusions related to lease identification, lease classification, and initial direct costs, and we did not elect the use of hindsight.

 

Lease ROU assets and liabilities are recognized at commencement date of the lease, based on the present value of lease payments over the lease term. The lease ROU asset also includes any lease payments made and excludes any lease incentives. When readily determinable, we use the implicit rate in determining the present value of lease payments. When leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date, including the lease term.

 

Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. As of March 31, 2021 we did not have any short-term leases.

 

The tables below present financial information associated with our lease.

 

   Balance Sheet Classification  March 31, 2021   December 31, 2020 
            
Right-of-use assets  Other long-term assets   20,612    23,145 
Current lease liabilities  Other current liabilities   11,028    13,107 
Non-current lease liabilities  Other long-term liabilities   13,718    13,909 

 

As of March 31, 2021, the maturities of our lease liability are as follows:

      
2021  $15,050 
Total  $15,050 
Less: Imputed interest   (1,332)
Present value of lease liabilities  $13,718 

 

10
 

 

NOTE 6. NOTES PAYABLE

 

The following table summarizes the Company’s notes payable:

 

   Interest rate   Date of maturity   March 31, 2021   December 31, 2020 
Truck loan (i)   5%   January 20, 2022   $7,990   $9,916 
Credit note I (ii)   12%   May 11, 2021        800,000 
Credit note II (iii)   12%   October 17, 2019        346,038 
Credit note III (iv)   15%   April 25, 2021        750,000 
Discount on credit note III               (5,976)
Credit note IV(v)   10%   June 30, 2021    933,095    937,109 
Discount on credit note IV           (238,577)   (285,768)
Credit note V(vi)   10%   December 31, 2021    918,049     
Discount on credit note V           (1,195)    
Credit note VI (vii)   10%   December 31, 2021    1,133,104     
Lee Lytton       On demand    3,500    3,500 
Joel Oppenheim (viii)   10%   On demand        161,900 
Joel Oppenheim (viii)   10%   On demand        15,000 
Joel Oppenheim(viii)   10%   October 17, 2018        240,000 
Credit Note VII (viii)   10%   December 31, 2021    416,900     
Origin Bank (PPP loan) (ix)           56,680    56,680 
M. Horowitz   10%   October 14, 2016    10,000    10,000 
             $3,239,546   $3,038,309 
Current portion:                    
Truck loan            $7,990   $9,343 
Credit note I                 800,000 
Credit note II                 346,038 
Credit note III                 744,023 
Credit note IV             694,518    651,251 
Credit note V             916,854     
Credit note VII             1,133,104     
Lee Lytton             3,500    3,500 
Joel Oppenheim                 161,900 
Joel Oppenheim                 15,000 
Joel Oppenheim                 240,000 
Credit note VII             416,900     
Origin Bank (PPP loan)             56,680    56,680 
M. Horowitz             10,000    10,000 
Current portion of notes payable            $3,239,546   $3,037,737 

 

  (i) On January 6, 2017, the Company purchased a truck and entered into an installment note in the amount of $35,677 for a term of five years and interest at 5.49% per annum. Payments of principal and interest in the amount of $683 are due monthly.

 

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  (ii) On May 9, 2018, Bow entered into an Amended and Restated Loan Agreement with a third party. The Loan Agreement increased by $800,000 the amount of a previous loan agreement entered into between Bow and the Lender, to $1,530,000. The amount owed under the Loan Agreement accrues interest at the rate of 12% per annum (19% upon the occurrence of an event of default) and is due and payable on May 11, 2021, provided that the amount owed can be prepaid prior to maturity, beginning 60 days after the date of the Loan Agreement, provided that the Company gives the Lender 10 days’ notice of our intent to repay and pays the Lender the interest which would have been due through the maturity date at the time of repayment. The Loan Agreement contains standard and customary events of default, including cross defaults under other indebtedness obligations of us and Bow, and the occurrence of any event which would have a material adverse effect on us or Bow. The Company is required to make principal payments of $10,000 per month from January through September 2019 with the remaining balance of $710,000 due at maturity on May 11, 2021. The additional $800,000 borrowed in connection with the entry into the Loan Agreement was used by the Company to acquire a 25% working interest in approximately 41,526 acres located in the Luseland, Hearts Hill, and Cuthbert fields, located in Southwest Saskatchewan and Eastern Alberta, Canada (collectively, the “Canadian Properties” and the “Working Interest”). Upon the disposition of Bow, a total of $730,000 of the obligations owed under the Loan Agreement were transferred to Blue Sky Resources Ltd. (“Blue Sky”).
     
    In order to induce the Lender to enter into the Loan Agreement, the Company agreed to issue the Lender 500,000 shares of restricted common stock (the “Loan Shares”), which were issued on May 18, 2018, and warrants to purchase 2,320,000 shares of common stock (the “Loan Warrants”), of which warrants to purchase (a) 320,000 shares of common stock have an exercise price of $0.10