| Notes Payable |
5. NOTES PAYABLE
The following table summarizes the Company’s
notes payable:
| |
|
|
|
|
|
|
Balance at: |
|
| |
|
Interest rate |
|
|
Date of maturity |
|
March 31, 2020 |
|
|
December 31, 2019 |
|
| Truck loan (ii) |
|
|
5.49 |
% |
|
January 20, 2022 |
|
|
14,304 |
|
|
|
16,141 |
|
| Lee Lytton |
|
|
— |
|
|
On demand |
|
|
3,500 |
|
|
|
— |
|
| Credit note I (iii) |
|
|
12 |
% |
|
May 11, 2021 |
|
|
800,000 |
|
|
|
800,000 |
|
| Credit note II (iv) |
|
|
12 |
% |
|
October 17, 2019 |
|
|
346,040 |
|
|
|
346,038 |
|
| Credit note III (v) |
|
|
15 |
% |
|
April 25, 2021 |
|
|
750,000 |
|
|
|
750,000 |
|
| Discount on Credit Note III |
|
|
— |
|
|
April 25, 2021 |
|
|
(20,320 |
) |
|
|
(25,101 |
) |
| Credit Note IV (vi) |
|
|
10 |
% |
|
January 02, 2023 |
|
|
1,120,000 |
|
|
|
— |
|
| Discount on Credit Note IV |
|
|
— |
|
|
January 02, 2023 |
|
|
(233,340 |
) |
|
|
— |
|
| Credit Note V (vii) |
|
|
10 |
% |
|
June 1, 2020 |
|
|
100,000 |
|
|
|
— |
|
| Discount on Credit Note V |
|
|
— |
|
|
June 1, 2020 |
|
|
(24,324 |
) |
|
|
— |
|
| Credit Note VI (viii) |
|
|
10 |
% |
|
May 14, 2020 |
|
|
125,000 |
|
|
|
— |
|
| Discount on Credit Note VI |
|
|
— |
|
|
May 14, 2020 |
|
|
(30,405 |
) |
|
|
— |
|
| SUDS Development Funding Note |
|
|
10 |
% |
|
June 1, 2020 |
|
|
62,000 |
|
|
|
— |
|
Mark Allen (not related party at
balance sheet date) |
|
|
12 |
% |
|
June 30, 2021 |
|
|
200,000 |
|
|
|
200,000 |
|
| M. Hortwitz |
|
|
10 |
% |
|
October 14, 2016 |
|
|
10,000 |
|
|
|
10,000 |
|
| |
|
|
|
|
|
|
|
|
3,222,455 |
|
|
|
2,097,078 |
|
| Current portion: |
|
|
|
|
|
|
|
|
(453,540 |
) |
|
|
(653,540 |
) |
| Long-term notes payable |
|
|
|
|
|
|
|
$ |
2,768,915 |
|
|
$ |
1,443,538 |
|
| |
(i) |
Not used. |
| |
|
|
| |
(ii) |
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. |
| |
|
|
| |
(iii) |
On May 9, 2018, Bow Energy Ltd. (“Bow”), a former wholly-owned subsidiary of the Company, 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 its 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 the Company and Bow, and the occurrence of any event which would have a material adverse effect on the Company 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”). |
| |
|
|
| |
|
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, a total of $730,000 of the obligations owed under the Loan Agreement were transferred to Blue Sky Resources Ltd. (“Blue Sky”). |
| |
|
|
| |
(iv) |
On September 17, 2018, the Company entered into a loan agreement with a third party for $200,000 to acquire an additional 3% working interest in the Canadian Properties. The loan bears interest at 12% per annum and has a maturity date of October 17, 2019. Payments of principal and interest in the amount of $6,000 are due monthly. The loan is secured against the Company’s 3% working interest in the Canadian Properties and has no financial covenants. |
| |
|
|
| |
(v) |
On April 25, 2019, the Company entered into a promissory note (an “Acquisition Note”) with a third-party in the amount of $750,000 to acquire working interests in the Utikuma oil field in Alberta Canada. The Note bears interest at 15% per annum and is due in full at maturity on April 25, 2021. No payments are required on the note until maturity while interest is accrued. In addition, warrants to purchase 500,000 shares of common stock with an exercise price of $0.12 per share expiring on May 1, 2021 were issued associated with the note. The fair value of issued warrants were recorded as a debt discount of $38,249 and amortization of $8,366. The notes hold a security guarantee of a 50% working interest in the Utikuma oil field and a 100% working interest in the TLSAU field. |
| |
|
|
| |
(vi) |
On January 2, 2020, the Company entered into a loan agreement in the amount of $1,000,000 with a third party (including a $120,000 origination fee). The note bore interest at an interest rate of $10% per annum and matures on June 30, 2020, with warrants to purchase 5,000,000 shares of common stock (the “Loan Warrants”), in Canadian dollars at an exercise price of $0.10 per share and expire in January 2, 2023. The fair value of issued warrants were recorded as a debt discount of $266,674 and monthly amortization of $11,111. These funds were placed in escrow for the future purchase of the Utikuma oil field (see Note 13: Subsequent Events) |
| |
|
|
| |
(vii) |
On January 3, 2020, the Company entered into a loan agreement in the amount of $100,000 with a third party. The note bore interest at an interest rate of $10% per annum and matures on June 1, 2020, with warrants to purchase 400,000 shares of common stock (the “Loan Warrants”), at an exercise price of $0.10 per share and expire in January 3, 2023. The fair value of issued warrants were recorded as a debt discount of $31,946 and monthly amortization of $1,775. |
| |
(viii) |
On February 14, 2020, the Company entered into a loan
agreement in the amount of $125,000 with a third party. The note bore interest at an interest rate of $10% per annum and matures on June
1, 2020, with warrants to purchase 750,000 shares of common stock (the “Loan Warrants”), at an exercise price of $0.10 per
share and expire in February 14, 2022. The fair value of issued warrants were recorded as a debt discount of $34,261 and monthly amortization
of $1,903.
|
On January 15, 2019, the Company entered into a loan
agreement in the amount of $125,000 with a third party. The note bore interest at an interest rate of $4% per annum and was to mature
on January 15, 2020. On September 30, 2019, Jovian Petroleum Corporation reimbursed the $125,000 to the third party. Consequently, the
$125,000 debt balances were transferred into the Jovian LOC and are now included in the $481,266 at March 31, 2020 (see Note 6: Related
Party Notes Payable)
On January 6, 2020, the Company entered into a consulting
agreement, with a third party, that included a funding clause where the Company borrowed $62,000 from a third party. The third party is
responsible for the future oversight and management of the SUDS field located in Creek County, Oklahoma. The note bore interest at an
interest rate of $10% per annum and matures on June 30, 2020.
The following is a schedule of future minimum repayments
of notes payable as of March 31:
| 2020 |
|
$ |
453,540 |
|
| 2021 |
|
|
2,768,915 |
|
| Thereafter |
|
|
— |
|
| |
|
$ |
3,222,455 |
|
|