NOTE 4. NOTES PAYABLE - RELATED PARTY |
9 Months Ended |
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Sep. 30, 2016 | |
| Receivables [Abstract] | |
| Loans, Notes, Trade and Other Receivables Disclosure [Text Block] |
NOTE 4. NOTES PAYABLE – RELATED PARTY
On June 30, 2016, the maturity date of the $350,000 and $200,000 Convertible Secured Promissory Notes (the “Notes”) between the Company and Rick Wilber (“Holder”) were extended to December 31, 2016. If at any time prior to December 31, 2016, the Company pays the Holder $500,000 on the Notes (together with all accrued interest), the Company will receive a $50,000 discount on the total principal amount of $550,000 outstanding under the Notes. If the Notes are fully paid by the Company, the Company will issue new warrants for the purchase of 500,000 shares of stock at an exercise price of $0.15 per share that will expire five (5) years from the grant date (and the old warrants will be extinguished). If payment is not made before December 31, 2016, no discount is allowed.
During the nine months ended September 30, 2016 and 2015 the Company amortized $171,573 and $103,520, respectively, of debt discount to interest expense. At September 30, 2016 the remaining unamortized debt discount is $0.
Purchase and Sale Agreement
With an effective date of September 28 2016, the Company acquired an additional 50% net working interest (bringing the Company’s interest to 60%) in the Slick Unit Dutcher Sands field (“SUDS”) located in Creek County Oklahoma, based on a Purchase and Sale Agreement between the Company and Jovian Petroleum Corporation and its subsidiaries, Jovian Resources, LLC. and SUDS Properties, LLC (together known as “Jovian”). The largest interest owner of Jovian is Zel C. Khan, our Chief Executive Officer, President and Director, and our Director Quinten Beasley who is the President of Jovian.
The Company issued two notes for a combined value of $4,000,000 in exchange for a cumulative 50% working interest in SUDS. One note is a Promissory Note for $1,000,000 bearing interest at 5% per annum and is due on December 31, 2016. If full payment is not made by December 31, 2016, we are entitled to extend the Note to March 31, 2017 by making a $10,000 payment in cash prior to maturity. The Promissory Note is secured by a 12.5% undivided working interest in the SUDS field. Although the note is due on December 31, 2016, in the event the Company closes a financing related to the SUDS field, 50% of the net proceeds received from the financing will be applied to reduce the Note. The second note is a Production Payment Note for $3,000,000 paid out of twenty percent (20%) of the 50% undivided interest of net revenues received in the purchase which are attributable to the SUDS field assets. We are required to make the production payments to seller no later than the end of each calendar month. The Production Payment Note is secured by a 37.5% undivided working interest in the SUDS field. For additional details on the acquisition of property see Note 8.
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