| NOTES PAYABLE |
NOTE 6: NOTES PAYABLE
| |
|
|
|
|
|
June 30, 2018 |
|
December 31, 2017 |
| |
|
Nominal
interestrate |
|
Date of
maturity |
|
Face value |
|
Carrying
amount |
|
Face value |
|
Carrying
amount |
| Truck loan (i) |
|
|
5.49 |
% |
|
January 6, 2022 |
|
$ |
59,923 |
|
|
$ |
59,923 |
|
|
$ |
56,786 |
|
|
$ |
56,786 |
|
| Promissory note (ii) |
|
|
12 |
% |
|
September 30, 2018 |
|
|
36,830 |
|
|
|
42,350 |
|
|
|
— |
|
|
|
— |
|
| Promissory note (iii) |
|
|
12 |
% |
|
September 30, 2018 |
|
|
35,692 |
|
|
|
39,987 |
|
|
|
— |
|
|
|
— |
|
| Bukit Energy Inc.(iv) |
|
|
8.5 |
% |
|
December 15, 2017 |
|
|
470,000 |
|
|
|
519,302 |
|
|
|
— |
|
|
|
— |
|
| Credit note (v) |
|
|
12 |
% |
|
May 11, 2021 |
|
|
1,530,000 |
|
|
|
1,556,366 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
$ |
2,132,445 |
|
|
|
2,217,928 |
|
|
|
56,786 |
|
|
|
56,786 |
|
| Long term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Truck loan |
|
|
|
|
|
|
|
|
|
|
|
|
20,926 |
|
|
|
|
|
|
|
24,204 |
|
| Credit note (v) |
|
|
|
|
|
|
|
|
|
|
|
|
1,079,544 |
|
|
|
|
|
|
|
— |
|
| Total long-term notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
1,100,470 |
|
|
|
24,204 |
|
|
|
24,204 |
|
| Current portion of notes payable |
|
|
|
|
|
|
|
|
|
|
|
$ |
1,117,458 |
|
|
$ |
32,582 |
|
|
$ |
32,582 |
|
The promissory notes are repayable in full on maturity.
The difference between the face value and carrying amount is attributed to accrued interest.
|
(i) |
On January 6, 2017, the Company purchased a truck and entered into an installment note with Don Ringer Toyota in the amount
of $59,923 for a term of five years at 5.49% APR. Current portion of this note is $38,997. |
|
(ii) |
The note was extended and matures on September 30, 2018 and carries interest at 12% per annum. |
|
(iii) |
The note was extended and matures on September 30, 2018 and carries interest at 12% per annum. |
|
(iv) |
In conjunction with the closing of the purchase of the Bukit assets, Bow issued a note payable to Bukit Energy Inc. of $500,000
with interest at the rate of 8.5% per annum, calculated monthly, not in advance, on the principal amount. The note matured on August
31, 2017. The note was extended to December 15, 2017. The note is in default and remained in default at the time of issuance of
these financial statements. The Company repaid $30,000 of principal during the period ended June 30, 2018. The note is currently
under negotiation for settlements and is in default. |
|
(v) |
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 ($1,530,000) 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 give the Lender 10 days’ notice of our intent to
repay and pay the Lender the interest which would have been due through the maturity date at the time of repayment. The Company
is also required to make a payment of principal and interest in the amount of $50,818 per month for a period of 36 months towards
the amount owed beginning on July 15, 2018; these payments were extended to begin on September 15, 2018. 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 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”). The Canadian Properties currently
encompass 64 sections, with 240 oil and 12 natural gas wells currently producing on the properties. Additionally, there are several
idle wells with potential for reactivation and 34 sections of undeveloped land (approximately 21,760 acres). The acquisition agreement
was entered on June 29, 2018 with an effective date of June 1, 2018.
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 per share in Canadian dollars,
and when the Loan Agreement is repaid; (b) 500,000 shares of common stock have an exercise price of $0.12 per share in U.S. dollars,
and expire on May 15, 2021; and (c) 1,500,000 shares of common stock have an exercise price of $0.10 per share in U.S. dollars
and expire on May 15, 2020.
The fair value of the 500,000
common shares issued were assessed at the market price of the stock on the date of issuance and fair valued at $47,500. In connection
with warrants issued in Canadian dollars, the Company has assessed an initial derivative liability of $30,401. The derivative is
fair valued at the end of each reporting period. The Company recorded a gain for the period ended June 30, 2018 of $3,556 to adjust
the liability to its fair value at the end of the reporting period of $26,845.
The fair value of the warrants
issued were assessed at $182,650. The Company determined the debt modification to be an extinguishment of debt and recorded a total loss on extinguishment of debt of $260,162.
|