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