Notes payable and long-term debt | 12 Months Ended |
Dec. 31, 2013 |
Notes payable and long-term debt [Text Block] | ' |
5 | Notes payable and long-term debt | | | | | | |
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| Notes payable and long-term debt as of December 31, 2013 and 2012 consisted of the following: | | | | | | |
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| | | 31-Dec-13 | | | 31-Dec-12 | |
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| | | $ | | | $ | |
| Note payable – Citizens Bank of Oklahoma | | 65,921 | | | 195,921 | |
| Note payable – Eaton Oil Tools | | 40,075 | | | - | |
| Note payable – TCA Global Credit Master Fund | | 2,096,610 | | | 1,608,974 | |
| Discount on TCA Global Credit Master Fund note | | (256,023 | ) | | (186,791 | ) |
| Note payable – Leede Financial | | 373,940 | | | 406,567 | |
| Total third-party notes payable and long-term debt | | 2,320,523 | | | 2,024,671 | |
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| Debenture payable – Palo Verde (Note 6) | | 3,000,000 | | | 2,500,000 | |
| Discount on Palo Verde debt | | (590,015 | ) | | (1,185,568 | ) |
| Note payable – TPC Energy | | 414,183 | | | 414,183 | |
| Discount on TPC Energy Note | | - | | | (9,994 | ) |
| Note payable – Mike Paulk | | 375,000 | | | 444,444 | |
| Note payable - Other | | 21,728 | | | 21,728 | |
| Total related party notes payable and long-term debt | | 3,220,896 | | | 2,184,793 | |
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| Total notes payable and long-term debt | | 5,541,419 | | | 4,209,464 | |
| Less: Current portion | | (5,541,419 | ) | | (2,655,025 | ) |
| Total notes payable and long-term debt, net of current portion | | - | | | 1,554,439 | |
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On September 10, 2009, the Company entered into a $500,000 unsecured short-term note with Citizens Bank of Oklahoma. The balance of the note was $422,464 and accrued interest at 10% per annum on December 31, 2011. On January 31, 2012, the loan was modified with a new interest rate of 12% and a maturity date of July 31, 2012. On July 31, 2012, the loan was further modified to extend the maturity date to September 30, 2013. On September 30, 2013, the loan was modified to extend the maturity date to February 28, 2014. All accrued interest is payable monthly. Proceeds of $475,500 from the note were paid to the Company and the remaining proceeds of $24,500 were used to pay off a prior note with Citizens Bank of Oklahoma. Net payments of $130,000 and $226,543 were made during the twelve months ended December 31, 2013 and 2012. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded that the revised terms constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring. |
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As of December 31, 2013 and December 31, 2012, the Company had an outstanding note to TPC Energy with a principal balance of $164,183. On March 31, 2013, the due date of the note was extended to March 31, 2014. Other terms of the note remain unchanged. The company evaluated the extension under FASB ASC 470-50 and FASB ASC 470-60 and concluded the revised term constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring. |
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During the first quarter of 2012, TPC Energy advanced $250,000 to the Company with repayment of the loan due one year from the date of advancement and with interest payable monthly. In addition to the $250,000, the Company assigned 50% of its interest in its share of the Liquidation Agents account distributions to TPC Energy for the life of the note. The rights were valued at $39,619 and were recorded as a discount on the note, which is being amortized over the life of the note using the effective interest method. During the year ended December 31, 2012, $29,626 of the discount was amortized to interest expense. On March 11, 2013, the due date of the note was extended to March 11, 2014 and TPC Energy will continue to receive the 50% of the company’s interests in its share of the Liquidation Agents account distributions for an extra year until March 11, 2014. The Company evaluated the extension under FASB ASC 470-50 and determined that the modification was substantial and qualified as a debt extinguishment. The additional rights were valued at $39,953 and were recorded as a loss on debt extinguishment. The remaining $9,994 debt discount was also amortized during the three months ended March 31, 2013. The TPC note is included in Notes Payable – Related Parties on the balance sheet as of December 31, 2013. |
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On February 17, 2011, the Company entered into a $500,000 note payable with Mike Paulk and Steven Ensz, directors of the Company, with an annual interest rate of 10%. The note, initially due February 15, 2012 has been renewed and extended until February 17, 2014. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded that the revised terms constituted a debt modification rather than a debt extinguishment or a troubled debt restructuring. The Company received an additional $5,000 during the year ended December 31, 2013. Payments totaling $74,444 and $55,556 were made during the years ended December 31, 2013 and 2012. |
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The Company entered into a financing agreement with TCA Global Credit Master Fund, LP during the first quarter of 2012. Proceeds of the financing are to be used for the drilling and completion of wells included in the Company’s inventory of Proved Undeveloped reserves (“PUD”). The Company has a commitment for a total amount of $3 million, before fees and expenses, through the issuance of a series of $1 million debentures. The debenture is secured by a first priority, perfected security interest and mortgage in oil and gas leases and properties. At no time shall the investor funds exceed 65% of the drilling and completion cost of the PUD’s with the balance provided by the Company’s generated funds. |
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In January 2012, the first tranche TCA debt of $1 million was issued. The debt was due on December 29, 2012 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Fees paid in cash and common stock to TCA Global Credit Master Fund, LP of $195,440 were recorded as a debt discount. As of December 31, 2012 the first tranche TCA debt was paid in full and the debt discount was fully amortized. |
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In connection with the issuance of first tranche TCA debt, the Company paid cash fees and issued shares and warrants to other third parties valued at $273,833. These cash fees, common shares and warrants were recorded as deferred financing costs, which were fully amortized as of December 31, 2012. |
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In August 2012, the second tranche TCA debt of $1 million was issued. The debt is due on August 31, 2013 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Out of $1 million debt proceed, $333,333 was used to pay off the remaining principal balance of the first tranche TCA debt, $497,000 was kept in escrow account to pay off two legal settlements, and net proceeds of $111,167 was received by the Company. As of December 31, 2012, the two legal cases were settled by paying the plaintiffs $374,767, and the remaining debt proceed of $122,233 in the escrow account was released and received by the Company. Fees paid and to be paid in cash totaling $157,500 to TCA Global Credit Master Fund, LP were recorded as a debt discount. As of December 31, 2012, $81,849 of debt discount had been amortized. |
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In connection with the issuance of second tranche TCA debenture, the Company paid cash fees and issued shares and warrants to other third parties valued at $117,489. These cash fees, common shares and warrants were recorded as deferred financing costs, of which $61,570 have been amortized as of December 31, 2012. |
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In October 2012, the third tranche TCA debt of $1 million was issued. The debt is due on October 31, 2013 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Out of $1 million debt proceeds, $187,882 was used as advanced payments for the first two payments due on the third tranche and net proceeds of $757,968 was received by the Company. Fees paid and to be paid in cash totaling $154,150 to TCA Global Credit Master Fund, LP were recorded as a debt discount. As of December 31,2012, $43,010 of debt discount has been amortized. |
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In connection with the issuance of third tranche TCA debenture, the Company paid cash fees to other third parties valued at $50,000.These cash fees were recorded as deferred financing costs, of which $14,363 have been amortized as of December 31, 2012. |
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In October 2012, the Company issued an additional $150,000 note to TCA. The debt is due on August 31, 2013 and is payable monthly with no interest rate. Payments totaling $50,000 have been made as of December 31, 2012. |
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In March 2013, the fourth tranche TCA debt of $1 million was issued. The debt is due on March 1, 2014 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Out of $1 million debt proceeds, $55,550 was paid to TCA for various fees, and net proceeds of $944,450 were received by the Company. The Company will also pay TCA $100,000 in cash in lieu of a stock bonus related to the issuance of the note. Fees paid and to be paid in cash totaling $155,550 to TCA Global Credit Master Fund, LP were recorded as a debt discount. |
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In connection with the issuance of fourth tranche TCA debenture, the Company paid cash fees to other third parties valued at $50,000. These cash fees were recorded as deferred financing costs. |
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| In July 2013, the fifth tranche TCA debt of $750,000 was issued. The debt is due on August 1, 2014 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Fees totaling $44,175 were paid with net proceeds of $705,825 received by the Company. Along with the issuance of the fifth tranche TCA debt, the Company combined all the outstanding TCA debts into one debt by entering into an amended debt agreement with TCA. The amended debt has a principal of $2,290,548.24, accrues interest at 5% per annum, and is due on August 1, 2014. Starting August 1, 2013 the Company is paying the amended TCA debt in monthly installments of $230,451.49 which includes the payment of fees and redemption premiums of $49,073 per month. The company evaluated the extension under FASB ASC 470-50 and FASB ASC 470-60 and concluded the revised term constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring. Immediately after the amendment, the unamortized debt discount on the TCA debt was $606,320. At December 31, 2013 all redemption premiums and other remaining fees were included in the TCA note payable. The total note principal balance of TCA debts and related unamortized debt discounts on December 31, 2013 are $2,096,610 and $256,023, respectively. | | | | | | |
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| During the twelve months ended December 31, 2013, payments totaling $1,709,990 were made to TCA debts and $695,681 of debt discounts were amortized. | | | | | | |
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| In December 2009, the Company entered into a $373,045 unsecured short-term note with Leede Financial with an interest rate of 12% per annum. The note is payable in Canadian dollars. On June 30, 2013, the Company extended the maturity date of note payable to Leede Financial to December 31, 2013. To date, the due date of this note has not been extended. The other terms of the note payable remain unchanged. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded the revised term constituted a debt modification. As the note is denominated in Canadian dollars, the Company adjusted the face value of the note based on fluctuations in exchange rates and recognized as foreign exchange gain (loss) in the statement of operations of $32,626 and ($33,521) during the twelve months ended December 31, 2013 and 2012, respectively. | | | | | | |
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| On August 1 2013, the Company converted its $48,000 accounts payable balance to Eaton Oil Tools to a note payable. Monthly payments of $4,119 which include interest at the rate of 6% per annum were to be made through August 2014. At May 9, 2014, six payments were past due. | | | | | | |