Annual report pursuant to Section 13 and 15(d)

NOTES PAYABLE

v3.22.1
NOTES PAYABLE
 12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
NOTES PAYABLE

NOTE 5. NOTES PAYABLE

 

   

Interest rate

     Date of maturity   December 31, 2020     December 31, 2019  
Truck loan (ii)     5.49 %   January 20, 2022     9,916       16,141  
Credit note I (iii)     12 %   May 11, 2021     800,000       800,000  
Credit note II (iv)     12 %   October 17, 2019     346,038       346,038  
Credit note III (v)     15 %   April 25, 2021     750,000       750,000  
Discount on credit note III     —     —     (5,976 )     (25,101 )
Credit note VI(vi)     10 %   January 01, 2020     937,019       —  
Discount on credit note VI                 (285,768 )     —  
Lee Lytton(i)           On demand     3,500       —  
Joel Oppenheim (vii)     10 %   On demand     161,900       —  
Joel Oppenheim (vii)     10 %   On demand     15,000       —  
Joel Oppenheim(vii)     10 %   October 17, 2018     240,000       —  
Origin Bank (PPP loan)                 56,680       —  
Mark Allen(viii)     12 %   June 30, 2021     —       200,000  
M. Hortwitz     10 %   October 14, 2016     10,000       10,000  
                  3,038,309       2,097,078  
Current portion:                            
Truck loan                 9,343       7,502  
Credit note I                 800,000       90,000  
Credit note II                 346,038       346,038  
Credit note III                 744,023       —  
Credit note VI                 651,251       —  
M. Hortwitz                 10,000       10,000  
Lee Lytton                 3,500       —  
Joel Oppenheim                 176,900       —  
Joes Oppenheim                 240,000       —  
Mark Allen                 —       200,000  
Origin Bank (PPP Loan)                 56,680       —  
Current portion of notes payable               $ 3,037,737     $ 653,540  

 

 

  (i) Note needs to be settled with the estate of Lee Lytton.
     
  (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 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 our 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 us and Bow, and the occurrence of any event which would have a material adverse effect on us 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 the Working Interest in the Canadian Properties.
     
    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, a total of $730,000 of the obligations owed under the Loan Agreement were transferred to Blue Sky.
     
  (iv)

On September 17, 2018, the Company entered into a loan agreement (LOC) with a third party for $200,000 (which was later increased to $500,000) to acquire an additional 3% working interest in the Canadian Properties. The loan bears interest at 3.5% 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 2019, the LOC balance increased by $150,000 resulting in a $346,038 ending balance. During 2020, the LOC balance decreased by $157,753 resulting in a $188,285 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 15% per annum and is due in full at maturity at 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 $0.012 per share expiring on May 1, 2021 were issued associated with the note and were recorded as a debt discount of $5,976 on the balance sheet. The notes hold a security guarantee of a 50% Working Interest in the Utikima oil field and a 100% Working Interest in the Twin Lakes Properties.

 

 

  (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 placed in escrow for the future purchase of the Utikuma oil field.
     
  (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. On February 22, 2021, Mr. Oppenheimer combined the loans, which now bear an interest rate of 10% and are due on December 31, 2021.

 
   

During 2019, the Company entered into a loan agreement in the amount of $200,000 with a third party. The note bears interest at an interest rate of 12% per annum and matures on June 30, 2021. At the maturity date, the note holder has the right to collect the principal plus interest or convert into 2,500,000 shares of common stock at $0.08 per share. In addition, upon conversion, the note holder will also receive 10,000,000 warrants at an exercise price of $0.10 per share, vesting immediately with a 36 month expiration period.

 

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 was transferred into the Jovian LOC and is now included in the $362,583 at December 31, 2020 (see Note 7: Related Party Notes Payable)

 

On April 23, 2020, the Company was granted a $56,680 business loan through the Paycheck Payment Protection (PPP) program administered through the CARES act. The loan amount was based 2.5 times the Company’s average monthly payroll costs. The Company is in the process of applying for loan forgiveness and expects to be granted the forgiveness. If forgiveness is granted, the loan principal will not have to be repaid. If not, the loan will earn 1% annual interest and will mature in 2 years.
     
  (viii) Mark Allen became a related party in 2020, therefore his note has been moved to that schedule.

 

The following is a schedule of future minimum repayments of notes payable as of December 31:

 

         
2021     3,037,737  
2022     573  
Thereafter     —  
Total    $ 3,038,310