Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

Related Party Transactions
9 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
Related Party Transactions

Note 9 – Related Party Transactions


Alternus Capital Holdings Limited


On December 24, 2015, FPI entered into a convertible promissory note in the amount of $600,000 with Alternus. The two-year note originally matured on December 23, 2017, and accrued interest at 8% per year. By its terms the note was automatically required to convert the outstanding principal and interest due under the terms of the note upon a merger or other combination occurring between FPI and an entity with shares listed for trading, which occurred on May 27, 2016. The conversion price of the note was established at $0.665 per share (the “Conversion Price”), subject to adjustment as described below. On April 5, 2016, and under substantially similar terms described herein, FPI received an additional $400,000 from Alternus. Under the agreements between Alternus and Foothills, Alternus had the right but not the obligation to subscribe for an aggregate of up to $3,500,000 of convertible notes, which, in the event of that full subscription, would convert into not less than 30% of the then outstanding shares of the “public” company. Through May 27, 2016, the date the Share Exchange, Alternus had invested $1,000,000 and based on the Conversion Price was issued 1,503,759 shares of the Company’s common stock in full satisfaction of its two notes. All accrued interest was waived and recorded as additional paid in capital.


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 (see Note 1). As a result of the purchase and sale agreement the Company acquired a $10,600 related party payable due to Equipment Solutions, Inc., which is owned by a director of the Company, Alex Hemb. As of September 30, 2017, the balance was paid.


Berwin Trading Limited


Effective January 6, 2017, the Company borrowed $1,250,000 from Berwin Trading Limited, a British Virgin Islands limited liability company. 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 January 6, 2017. This loan is unsecured, bears interest at 9% per year and is due and payable in 120 days from the receipt of funds. 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 September 30, 2017, the balance of accrued interest was $123,904. During the three and nine months ended September 30, 2017, we recorded interest expense in the amount of $42,534 and $123,904, respectively.


On May 5, 2017, the Company and Berwin agreed to extend the maturity date of the debenture to June 20, 2017, in return for an annual interest rate increase from 9% to 13.5% per annum for the life of the debenture. On November 3, 2017, Berwin agreed to defer repayment of this note to a later date, which is as yet undetermined, and acknowledged that the Company is not in default regarding this Debenture. Berwin also reaffirmed its belief that the Company will either extend or repay the obligation to their satisfaction. As partial consideration for the deferment, the Company agreed to issue Berwin 100,000 shares of its restricted common stock.


Wilshire Energy Partners, LLC, and Aegis International, LLC


Effective as of December 18, 2015, in connection with the then formation and organization of Foothills Petroleum Inc., Wilshire Energy Partners, LLC (“Wilshire”), an entity controlled by Kevin J. Sylla, Aegis International, LLC (“Aegis”), and Foothills entered into a Business Development Services Agreement (“BDSA”). Under the BDSA the parties agreed that:


  1. Wilshire would transfer its 100% membership interest in Foothills Exploration LLC, a Wyoming limited liability company (“FEL”) to Foothills, and that Foothills would issue 4.5 million shares of its common stock to Wilshire on its organization or as soon thereafter as may be practicable.
  2. Wilshire would endeavor in good faith, with the assistance of Aegis, to obtain $3 million to $3.5 million of financing in the form of equity and/or convertible notes to implement the business plan that was under formation on behalf of Foothills.
  3. Aegis would perform the following business development services:
    provide senior management principally in the form of services of B.P. Allaire;
    deliver or oversee administrative services on day to day basis;
    assist in securing a chief financial officer;
    formulate, craft and deliver a detailed business plan including forecasts;
    formulate or assist in formulating, budgets and other financial information;
    recruit or assist in recruiting experienced executive directors with proven track records whose backgrounds will be attractive to the oil and gas community and potential investors;
    create and deliver a website that depicts the Foothills operations; and
    provide such other services as may be appropriate and necessary to implement and execute upon the business plan of Foothills.
  4. For its services as outlined under the BDSA, Foothills would pay to Aegis from funds received, $150,000 through December 31, 2016, (the “Foothills Initial Organizational Term”). As of December 31, 2016, this payment was made in full.
  5. Following the Foothills Initial Organizational Term, Foothills on an at-will basis shall pay B.P. Allaire $5,000 per month for his services as chief operating officer and executive director, on terms subject to cancellation, on 30 days’ notice, by either of Foothills or B.P. Allaire. Effective September 1, 2016, the Company increased Mr. Allaire’s salary to $7,000 per month.
  6. Wilshire would assign, effective no later than December 29, 2015, all right, title and interest in FEL in exchange for 4.5 million shares of common stock of Foothills.


In furtherance of the Business Development Services Agreement, Wilshire assigned Foothills Exploration, LLC, (“FEL”) to Foothills on its organization in exchange for 4.5 million shares of Foothills, and Foothills thereby acquired control of the Springs Prospect, owned by FEL, consisting of 38,120 contiguous acres. Foothills regards the Springs Prospect as a valuable multiple objective oil resource play in the Greater Green River Basin of Wyoming. Through Wilshire’s assistance, Foothills entered into two agreements with Alternus, whereby Foothills obtained a total of $1,000,000 of financing in the form of convertible notes that upon completion of the Share Exchange were converted, at $0.665 per share, into 1,503,759 shares of the Company’s common stock.


In connection with the hiring of Ritchie Lanclos as Executive Vice President of the Company and Vice President of Exploration of FPI, and Eleazar Ovalle as Executive Vice President of the Company and Vice President of Geology and Geophysical of FPI, FPI agreed to pay Wilshire, one of our principal shareholders, pursuant to a Services Agreement entered into by and between FPI and Wilshire, a fee of 25% of the gross annual salary, including all cash and equity compensation, but excluding any bonuses to be received by Mr. Lanclos and Mr. Ovalle. In the event either of Mr. Lanclos or Mr. Ovalle leaves FPI of his own volition or is terminated for cause within 90 days from August 15, 2016 or August 11, 2016, respectively, the commencement days of their employment, Wilshire agreed to refund FPI 100% of fees received, minus $2,500.


On May 31, 2017, we entered into a Securities Purchase Agreement with Wilshire, pursuant to which we sold and agreed to issue 200,000 units at a purchase price of $1.00 per unit for an aggregate amount of $200,000. Each unit consisted of one share of the Company’s common stock and one warrant to purchase a share of the Company’s common stock, exercisable for a period of three years from the date of original issuance at an exercise price of $1.50 per share. Wilshire Energy Partners, LLC, is controlled by Kevin J. Sylla, our Executive Chairman and Chief Executive Officer of FPI, and has been determined to be a Related Party. See the Company’s 8-K filed June 5, 2017 with the Commission and exhibit thereto. On September 29, 2017, we issued 100,752 additional shares of common stock and amended warrants to purchase 300,752 shares of common stock of the Company at a strike price of $0.665 per share due to down round feature triggered by warrant issued at a strike price of $0.665 per share on the day of trigger.