NOTES PAYABLE |
NOTE
6. NOTES PAYABLE
The
following table summarizes the Company’s notes payable:
SCHEDULE OF NOTES PAYABLE
|
|
Interest rate |
|
|
Date of maturity |
|
|
September 30, 2021 |
|
|
December 31,
2020
|
|
Truck loan (i) |
|
5 |
% |
|
|
January 20, 2022 |
|
|
$ |
4,022 |
|
|
$ |
9,917 |
|
Credit note I (ii) |
|
12 |
% |
|
|
May 11, 2021 |
|
|
|
— |
|
|
|
800,000 |
|
Credit note II (iii) |
|
12 |
% |
|
|
October 17, 2019 |
|
|
|
— |
|
|
|
346,038 |
|
Credit note III (iv) |
|
15 |
% |
|
|
April 25, 2021 |
|
|
|
— |
|
|
|
750,000 |
|
Discount on credit note III |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,976 |
) |
Credit note IV(v) |
|
10 |
% |
|
|
June 30, 2021 |
|
|
|
838,220 |
|
|
|
937,109 |
|
Discount on credit note IV |
|
— |
|
|
|
— |
|
|
|
(144,194 |
) |
|
|
(285,768 |
) |
Credit note V(vi) |
|
10 |
% |
|
|
December 31, 2021 |
|
|
|
918,049 |
|
|
|
— |
|
Credit note VI (vii) |
|
10 |
% |
|
|
December 31, 2021 |
|
|
|
1,133,104 |
|
|
|
— |
|
Lee Lytton |
|
— |
|
|
|
On demand |
|
|
|
3,500 |
|
|
|
3,500 |
|
Joel Oppenheim (viii) |
|
10 |
% |
|
|
On demand |
|
|
|
— |
|
|
|
161,900 |
|
Joel Oppenheim (viii) |
|
10 |
% |
|
|
On demand |
|
|
|
— |
|
|
|
15,000 |
|
Joel Oppenheim(viii) |
|
10 |
% |
|
|
October 17, 2018 |
|
|
|
— |
|
|
|
240,000 |
|
Credit Note VII (viii) |
|
10 |
% |
|
|
December 31, 2021 |
|
|
|
416,900 |
|
|
|
— |
|
Origin Bank (PPP loan) (ix) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
56,680 |
|
Quinten Beasley |
|
10 |
% |
|
|
October 14, 2016 |
|
|
|
5,000 |
|
|
|
— |
|
Jovian Petroleum Corporation (x) |
|
3.5 |
% |
|
|
December 31, 2021 |
|
|
|
178,923 |
|
|
|
— |
|
M. Horowitz |
|
10 |
% |
|
|
October 14, 2016 |
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3,363,524 |
|
|
$ |
3,038,310 |
|
Current portion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Truck loan |
|
|
|
|
|
|
|
|
$ |
4,022 |
|
|
$ |
9,345 |
|
Credit note I |
|
|
|
|
|
|
|
|
|
— |
|
|
|
800,000 |
|
Credit note II |
|
|
|
|
|
|
|
|
|
— |
|
|
|
346,038 |
|
Credit note III |
|
|
|
|
|
|
|
|
|
— |
|
|
|
744,023 |
|
Credit note IV |
|
|
|
|
|
|
|
|
|
694,026 |
|
|
|
651,251 |
|
Credit note V |
|
|
|
|
|
|
|
|
|
918,049 |
|
|
|
— |
|
Credit note VI |
|
|
|
|
|
|
|
|
|
1,133,104 |
|
|
|
— |
|
Lee Lytton |
|
|
|
|
|
|
|
|
|
3,500 |
|
|
|
3,500 |
|
Joel Oppenheim |
|
|
|
|
|
|
|
|
|
— |
|
|
|
161,900 |
|
Joel Oppenheim |
|
|
|
|
|
|
|
|
|
— |
|
|
|
15,000 |
|
Joel Oppenheim |
|
|
|
|
|
|
|
|
|
— |
|
|
|
240,000 |
|
Credit note VII |
|
|
|
|
|
|
|
|
|
416,900 |
|
|
|
— |
|
Origin Bank (PPP loan) |
|
|
|
|
|
|
|
|
|
— |
|
|
|
56,680 |
|
Quinten Beasley |
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
— |
|
Jovian Petroleum Corporation |
|
|
|
|
|
|
|
|
|
178,923 |
|
|
|
— |
|
M. Horowitz |
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
10,000 |
|
Current portion of notes payable |
|
|
|
|
|
|
|
|
$ |
3,363,524 |
|
|
$ |
3,037,737 |
|
|
(i) |
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. |
|
(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
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 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”). 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”). |
|
|
|
|
|
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. |
|
|
|
|
|
On
January 1, 2021, the Lender signed an amended loan agreement, which moved the balance of this note to credit note VI. More details
can be found in footnote (vii). |
|
|
|
|
(iii) |
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 $146,000 resulting in a $346,038
ending balance. On January 1, 2021, the Lender signed an amended loan agreement, which moved the balance of this note to credit note
VI. More details can be found in footnote (vi) and (vii). |
|
|
|
|
(iv) |
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 working interest in the Utikuma oil field and a working interest in the TLSAU field. On January
1, 2021, the Lender signed an amended loan agreement, which moved the balance of this note to credit note V. More details can be
found in footnote (vi). |
|
|
|
|
(v) |
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
on 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. Pursuant
to a loan extension agreement, on October 30, 2020, the Company issued warrants to purchase 5,000,000 of common stock, at an exercise
price of $0.05 per share, expiring on January 6, 2023. The fair value of the issued warrants was recorded as a debt discount of $166,289
and monthly amortization of $4,614.14. |
|
|
|
|
(vi) |
On
January 1, 2021, the Company signed an amended loan agreement with a third party for $918,049, which combined credit note III along
with $146,038 of credit note II and accrued interest on those amounts. The loan bears interest at 10% per annum and has a maturity
date of December 31, 2021. The warrants associated with credit note III are applied as a discount to the amended loan. The note holds
a security guarantee of a working interest in the Utikuma oil field and a working interest in the TLSAU field. |
|
|
|
|
(vii) |
On
January 1, 2021, the Company signed an amended loan agreement with a third party for $1,133,104, which combined credit note I along
with $200,000 of credit note II and accrued interest on those amounts. The loan bears interest at 10% per annum and has a maturity
date of December 31, 2021. The note holds a security interest against the 25% Working Interest in the Cona assets. |
|
|
|
|
(viii) |
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 12, 2021, the Company entered
into an amended loan agreement in the amount of $416,900 that consolidated these amounts. The loan bears interest at 10% per annum
and has a maturity date of December 31, 2021. |
|
|
|
|
(ix) |
On
April 23, 2020, the Company was granted a $56,680 business loan through the Paycheck Protection Program (PPP) administered through
the CARES act. The loan amount was based 2.5 times the Company’s average monthly payroll costs. The company applied for loan
forgiveness, and it was granted on July 26, 2021. |
|
|
|
|
(x) |
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 (“Jovian”). 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 former CEO and director. The initial
agreement was for a period of 6 months, and it 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 period-end this LOC has
been extended until December 31, 2021. As of September 1, 2021, Zel Khan and Quinten Beasley resigned from their positions at Petrolia
Energy, so this note has been removed from the related party section. |
The
following is a schedule of future minimum repayments of notes payable as of September 30, 2021:
SCHEDULE OF FUTURE MINIMUM REPAYMENTS OF NOTES PAYABLE
|
|
|
|
|
2021 |
|
$ |
3,507,717 |
|
Thereafter |
|
|
— |
|
Total |
|
$ |
3,507,717 |
|
|