Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

Notes Payable

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

8. NOTES PAYABLE

		Nominal								September 30, 2018								December 31, 2017
		interest rate				Date of maturity				Face value				Carrying amount				Face value				Carrying amount
Truck loan (i)			5.49	%			January 6, 2022			$	59,367			$	59,367			$	56,786			$	56,786
Credit note I (ii)			12	%			May 11, 2021				800,000				789,804				—				—
Credit note II (iii)			12	%			October 17, 2019				200,000				200,000				—				—
										$	1,059,367				1,049,171			$	56,786				56,786
Long term debt
Truck loan															20,370								24,204
Credit note I															710,000								—
Credit note II															149,703								—
Current portion of notes payable														$	169,098							$	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 an annual percentage rate (APR) of 5.49%. The current portion of this note is $38,997.

	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 ($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 the Working Interest in the Canadian Properties described above in Note 6.

		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 expire in May 15, 2021, (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 valued at $47,500. The fair value of the Canadian dollar denominated warrants issued were assessed at $30,012 using the Black Scholes Option Pricing Model. The fair value of the U.S. dollar denominated warrants issued were assessed at $182,650 using the Black Scholes Option Pricing Model. The Company determined the debt modification to be an extinguishment of debt and recorded a total loss on extinguishment of debt of $260,162.

		Upon the disposition of Bow pursuant to the Exchange Agreement described above under Note 5, a total of $730,000 of the obligations owed under the Loan Agreement transferred to Blue Sky.

	iii.	On September 17, 2018, the Company entered into a loan agreement with a third party for $200,000 for the purpose of acquiring an additional 3% working interest in the Canadian Properties (note 6). The loan bears interest at 12% per annum and has a maturity date of October 17, 2019. Payments of principal and interest are due monthly, commencing on October 17, 2018. The loan is secured against the Company’s 3% Working Interest in the Canadian Properties and has no financial covenants.