Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  

Note 5 – Acquisition


On December 30, 2016, Foothills, through its indirect wholly owned subsidiary, Foothills Exploration Operating, Inc. (“FEOI”) entered into a purchase and sale agreement with Total Belief Limited (“TBL”), a British Virgin Islands limited liability company with its principal office at Room 1402, 14/F, New World Tower I, 16-18 Queen’s Road Central, Hong Kong and a direct wholly-owned subsidiary of New Times Energy Corporation Limited (“NTE”), a Bermuda limited liability company whose shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited. Under its agreement with TBL, the Company purchased membership interests in the companies listed below, constituting all of the ownership interest and claims that TBL has or may have in these companies, as defined below.


Based on the closing of its agreement with TBL, the Company acquired:


  Clear Elite Holdings Limited (“CEH”), a British Virgin Islands limited liability company, which is the owner of 100% of the membership interests of Golden Giants Limited, a British Virgin Islands limited liability company (“GGL”), which owns:


  o 100% of the membership interests of NTE-Utah, LLC, a Delaware limited liability company (“NTE-Utah”), which in turn owns 100% of the membership interests of Tiger Energy Operating, LLC (“TEO”), a Nevada limited liability company, which in turn owns 100% of the membership interests of Tiger Energy Mineral Leasing, LLC (“TEML”), a Nevada limited liability company, with owned oil and gas leases, wells, related oil and gas bonds, and oil and gas lease rights and options, found in approximately 280 acres in Uintah County, Utah, and cash assets held by the entities; and


  o 750 units of membership interests (representing 75% total equity ownership) of Tiger Energy Partners International, LLC (“TEPI”), a Nevada limited liability company with owned assets including:


  All rights and interests pertaining to the Global Settlement Agreement (“GSA”) for the Uintah and Ouray Reservation between Mountain Oil & Gas, Inc. and certain entities affiliated with it and the Ute Indian Tribe of the Uintah and Ouray Reservation, dated December 22, 2014;
  All rights and interests acquired in the Purchase and Sale Agreements between TEPI and Mountain Oil & Gas, Inc. dated April 16, 2012, and December 18, 2012;
  All cash held in an attorney trust account earmarked for payments to certain vendors and other creditors;
  $240,000 cash held in escrow for State of Utah Department of Natural Resources Division of Oil, Gas and Mining (DOGM); and
  Cash balances in all company bank accounts.


  Prominent Sino Holdings Limited (“PSH”) and Value Train Investments Limited (“VTI”), each a British Virgin Islands limited liability company, and each a direct wholly-owned subsidiary of TBL, and that together own 55.63% of the shares of Grey Hawk Exploration, Inc. (“Grey Hawk”), a British Columbia, Canada company, constituting ownership of 13,166,667 Grey Hawk common shares. Grey Hawk owns a non-operated working interest in two non-producing wells in the southern portion of the Natural Buttes Field.


Under the acquisition agreement the parties agreed to determine and pay the purchase price of $10.75 million for these assets and ownership interests as follows:


  A cash payment of $75,000 in connection with closing;
  Additional cash payment of $675,000 payable within 10 business days following execution of the agreement;
  2,083,334 shares of restricted common stock of the Company valued for accounting purposes at $3,812,500, or at price per share of $1.83 (valued by the parties at $4,000,000 at an agreed upon price per share of $1.92); and
  A promissory note delivered at closing in the principal amount of $6,000,000 that:


  o has a term of 18 months from the Closing Date;
  o accrues no interest during its term; and
  o requires the entire principal amount to be due and payable upon maturity.


The Company acquired these assets of TBL and those of its subsidiaries subject to their respective debt obligations, other than for a promissory note, dated July 28, 2016, originally issued by GGL to a third party, in the original principal amount of $3,422,353. Upon delivery of the $6,000,000 note to TBL, the third party and TBL agreed that the $3,422,353 note has been satisfied in full and wholly discharged as to GGL.


The Company accounted for the acquisition of these assets using the fair value method of accounting. Based on several factors including the purchase price, the value of the consideration provided to the seller, and an independent valuation of the assets acquired less liabilities and future estimated capital and operating expenditures to bring the assets to producing status. The Company then assigned the purchase price to the assets acquired by class of assets.


Concurrently with the foregoing, the Company also acquired the remaining 25% membership interests in TEPI from Green Stone Capital Partners Limited, a Cayman Islands limited liability company, in exchange for assumption of Greenstone’s proportionate share of TEPI obligations and liabilities. Kevin Sylla, who beneficially owns approximately 53% of Wilshire Energy Partners, LLC, a principal stockholder of the Company, and who has served as Managing Director of TEPI and of TEO introduced the Company to TBL. Subsequently, Mr. Sylla was appointed director and Chief Executive Officer of FPI effective March 1, 2017.


The total purchase price for the TBL acquisition was allocated as follows:


Cash   $ 358,130  
Cash in escrow     240,000  
Oil & gas properties     10,016,990  
Drilling equipment     265,578  
Investment     100  
Bond deposits     295,000  
Accounts payable     (389,325 )
Contingent Liabilities     (213,372 )
Related party payable     (10,600 )
Net assets acquired   $ 10,562,501