Quarterly report pursuant to Section 13 or 15(d)

Notes Payable (Tables)

v3.21.2
Notes Payable (Tables)
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Schedule of Notes Payable

The following table summarizes the Company’s notes payable:

 

              Balance at:  
    Interest rate     Date of maturity   September 30, 2020     December 31, 2019  
Truck loan (ii)     5.49 %   January 20, 2022     11,830       16,141  
Lee Lytton (viii)         On demand     3,500        
Credit note I (iii)     12 %   December 31, 2021     800,000       800,000  
Credit note II (iv)     12 %   December 31, 2021     346,040       346,038  
Credit note III (v)     15 %   December 31, 2021     750,000       750,000  
Discount on Credit Note III         December 31, 2021     (10,757 )     (25,101 )
Credit Note IV (vi)     10 %   June 30, 2021     875,000        
Discount on Credit Note IV         June 30, 2021     (166,672 )      
Joel Oppenheim (vii), (viii)     12 %   On demand     15,000          
Joel Oppenheim (vii), (viii)     10 %   On demand     176,900          
Joel Oppenheim (i), (viii)     12 %   On demand     240,000          
Mark M Allen (viii)     12 %   June 30, 2021             200,000  
Origin Bank (PPP Loan)         April 23, 2020     56,680        
M. Hortwitz (viii)     10 %   On demand     10,000       10,000  
                  3,107,521       2,097,078  
Current portion:                 (782,511 )     (653,540 )
Long-term notes payable               $ 2,325,010     $ 1,443,538  

 

  (i) 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.
     
  (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.

 

During 2020, the LOC balance increased by $150,000 resulting in a $346,040 ending balance.

 

  (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 9% 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”), at an exercise price of $0.10 per share in Canadian dollars 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 initially placed in escrow, then on May 29, 2020 they were used for the purchase of the Utikuma oil field (see Note 4: Evaluated Properties)

 

  (vii)

Various Shareholder Advances provided by Mr. Oppenheim during 2018 and 2019. There were no formal documents drawn. Interest rates were applied based on other similar loan agreements entered into by the Company during that period. The loans are now due on demand.

 

  (viii) These lenders are included in both Note 5 – Notes Payable and Note 6 – Related Party Notes Payable because their classification changed from the prior year to the current year. Specifically, in the prior year they were a third party lender and then they became a related party lender in the current year, or vice versa.

Schedule of Future Minimum Repayments of Notes Payable

The following is a schedule of future minimum repayments of notes payable as of September 30:

 

2020   $ 782,511  
2021     2,325,010  
Thereafter      
    $ 3,107,521