Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

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Notes Payable
3 Months Ended
Mar. 31, 2017
Notes Payable [Abstract]  
Notes Payable

Note 8 – Note Payable

 

On December 30, 2016, in connection with the TBL acquisition (see Note 1), Foothills entered into a promissory note in the amount of $6,000,000 with Total Belief Limited. This note matures on June 30, 2018, and accrues no interest during its term. $342,804 imputed interest was recorded as debt discount. $342,804 was determined using the present value method based on the following assumptions: (i) adjusted interest rate 4% (ii) expected life of 1.5 years. During the three months ended March 31, 2017, we amortized $57,134 debt discount into interest expense. The Company has reduced the value of its oil and gas properties in the proportion of the debt discount allocated to the note.

 

Effective January 5, 2017, Foothills borrowed $1,000,000 from Full Wealth Investment Hong Kong Limited, a limited liability company organized under the laws of Hong Kong. The Company executed a promissory note, titled as a Debenture, with the lender dated as of December 30, 2016, with proceeds being received by the Company on the above stated date. This loan is unsecured, bears interest at 9% per year and is due and payable in 120 days from the receipt of fund. If any amount payable is not paid when due, any such overdue amount shall bear interest at the default rate of 11% from the date of such non-payment until such amount is paid in full. The Company used net proceeds of this loan to satisfy certain obligations under a Purchase and Sale Agreement with Total Belief Limited, dated December 30, 2016, for general working capital and to support certain target drilling activities. As of March 31, 2017, the balance of accrued interest was $22,438. The Company and Full Wealth Investment Hong Kong Limited have been in discussions to extend the term of this debenture upon terms that are comparable to those for the Berwin Trading Limited debenture and Full Wealth Investment Hong Kong Limited has acknowledged that its debenture is not deemed to be in default.