Annual report pursuant to Section 13 and 15(d)

Related Party Notes Payable

Related Party Notes Payable
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Notes Payable



The chart below summarizes the related party Notes Payable as of December 31, 2019 and 2018.


    Interest rate     Date of maturity   December 31, 2019     December 31, 2018  
Leo Womack (i)         On demand           3,000  
Lee Lytton (i)         On demand     3,500       3,500  
Quinten Beasley     10 %   October 14, 2016     10,000       10,000  
Joel Oppenheim (i)         On demand     217,208       215,333  
Joel Oppenheim     12 %   On demand     15,000        
Bow Energy Ltd. (i)         On demand           33,144  
Blue Sky Resources (i)         On demand           131,699  
Jovian Petroleum Corporation (ii)     3.5 %   December 31, 2021     362,583       35,210  
Ivar Siem (iii)     12 %   On demand     100,000       20,000  
Ivar Siem (iii)     12 %   On demand     75,000        
Joel Oppenheim (iii)     12 %   December 31, 2019     200,000       10,000  
Blue Sky Resources (iv)     9 %   May 31, 2019           148,862  
                $ 983,291     $ 610,748  



Note: Mark Allen’s notes were not included in related party notes payable at December 31, 2019 because he was not appointed as an officer of the Company until September 1, 2020. In September 2020 his notes will be reported in related party notes payable.


  (i) Balances are non-interest bearing and due on demand.


  (ii) On February 9, 2018, the Company entered into a Revolving Line of Credit Agreement (“LOC”) for $200,000 (subsequently increased to $500,000 on April 12, 2018) with Jovian Petroleum Corporation. The CEO of Jovian is Quinten Beasley, our former director (resigned October 31, 2018), and 25% of Jovian is owned by Zel C. Khan, our CEO and director. The initial agreement is for a period of 6 months and can be extended for up to 5 additional terms of 6 months each. All amounts advanced pursuant to the LOC will bear interest from the date of advance until paid in full at 3.5% simple interest per annum. Interest will be calculated on a basis of a 360-day year and charged for the actual number of days elapsed. Subsequent to year-end this LOC has been extended until December 31, 2021.



On August 17, 2018, the Company sold an aggregate of $90,000 in convertible promissory notes (the “Director Convertible Notes”), to the Company’s directors, Ivar Siem ($20,000) through an entity that he is affiliated with; Leo Womack ($60,000); and Joel Oppenheim ($10,000). The Director Convertible Notes accrue interest at the rate of 12% per annum until paid in full and were due and payable on October 17, 2018. The amount owed may be prepaid at any time without penalty. The outstanding principal and interest owed under the Director Convertible Notes are convertible into common stock of the Company, from time to time, at the option of the holders of the notes, at a conversion price of $0.10 per share. As additional consideration for entering into the notes, the Company agreed to grant warrants to purchase one share of the Company’s common stock at an exercise price of $0.10 per share for each dollar loaned pursuant to the Director Convertible Notes (the “Bridge Note Warrants”). The warrants had a contractual life of one year. As such, the Company granted (a) 20,000 Bridge Note Warrants to an entity affiliated with Ivar Siem; (b) 60,000 Bridge Note Warrants to Leo Womack; and (c) 10,000 Bridge Note Warrants to Joel Oppenheim. The Director Convertible Notes contain standard and customary events of default. The Company fair valued the warrants issued using the Black-Scholes Option Pricing Model for a total fair value of $6,249. On October 22, 2018, $60,000 in Director Convertible Notes were settled by offsetting against $60,000 proceeds required for the exercise of warrants.


On August 15, 2019, the Company entered into a loan agreement in the amount of $200,000 with Joel Oppenheim. The note bears interest at an interest rate of 12% per annum and payments of $50,000 are due monthly beginning September 2, 2019 with the remaining balance due in full at maturity on December 31, 2019. In association with the loan, the Company issued 200,000 warrants at an exercises price of $0.10 per share that expire on August 15, 2021. The warrants fully vest on maturity date. The notes are secured by a 50% Working Interest in the SUDS field and Noack field sale proceeds.


On August 15, 2019, the Company entered into a loan agreement in the amount of $75,000 with Ivar Siem. The note bears interest at an interest rate of 12% per annum with a four (4) month maturity.


On December 4, 2019, the Company entered into a loan agreement in the amount of $100,000 with Ivar Siem. The note bears interest at an interest rate of 12% per annum with a six (6) month maturity. At the maturity date, the note holder has the right to collect the principal plus interest or convert into 1,250,000 shares of common stock at $0.08 per share. In addition, if converted, the note holder will also receive 5,000,000 warrants at an exercise price of $0.10 per share, vesting immediately with a 36 month expiration period.


  (iv) On June 8, 2018, the Company entered into the Acquisition Note with Blue Sky in the amount of CAD$406,181. The Note bears interest at 9% per annum and is due in full at maturity on November 30, 2018. The Company may, at its sole discretion, extend the maturity date for a period of six months with notice to the lender and payment of 25% of the principal amount. At December 31, 2018, the maturity date had been extended to May 31, 2019. On April 1, 2019, the Company utilized its LOC with Jovian to pay off in its entirety the June 8, 2018 Acquisition Note with Blue Sky.


During 2019, $120,000 of related party notes and payables were converted to shares. Specifically, Leo Womack for $ 20,000, Joel Oppenheim for $40,000, Jovian for $40,000 and American Resources for $20,000. See Note 11 for further explanation.


The following is a schedule of future minimum repayments of related party notes payable as of December 31, 2019:


2020   $ 983,291  
    $ 983,291