NOTE 4. NOTES RECEIVABLE

On February 16, 2022, Petrolia Canada Corporation (PCC), a wholly-owned subsidiary of the Company entered into a Purchase and Sale Agreement (PSA) and Debt Settlement Agreement (DSA) with Prospera Energy, Inc. (Prospera) whereby PCC sold its 28% working interest in the Luseland, Hearts Hill and Cuthbert fields to Prospera. The PSA and DSA agreements were effective as of October 1, 2021. The DSA included a convertible debenture for $510,000 (CAD) with an interest rate of 8% per annum, compounded quarterly for a term of two years.

The debenture was convertible at PCC’s option into common shares of Prospera at a conversion price of $0.05 (CAD) per share in the first year, from March 1, 2022 to March 31, 2023 and $0.10 (CAD) in the second year from April 1, 2023 to March 31, 2024. Applicable interest was payable in cash or shares of Prospera at the current market price. The convertible debenture was converted into equity of Prospera in February and March of 2023, as discussed below in Note 5.