Notes Receivable

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Notes Receivable

4. NOTES RECEIVABLE

Alabama Graphite Corp. Note Receivable

In conjunction with its entry into the arrangement agreement to acquire Alabama Graphite, on December 13, 2017, the Company executed a secured convertible loan agreement (the “Alabama Graphite Loan”), whereby the Company agreed to provide a non-revolving convertible loan facility of up to USD $2,000,000 to Alabama Graphite for the purpose of funding operations until the acquisition could be finalized. For six months ended June 30, 2018, advances under the loan were $949,280 and accrued interest was $12,227. As of April 23, 2018, the Company had advanced $1,781,794 on the Alabama Graphite Loan and had accrued interest receivable of $13,457. This represents the total advances prior to the closing of the acquisition.

With the completion of the acquisition on April 23, 2018 (as discussed in Note 3), the Alabama Graphite Loan became part of the consideration paid for the acquisition and was incorporated into the purchase price allocation to the assets and liabilities of the acquired company. Due to the inclusion of the loan in the acquisition purchase price, the loan has been classified as a non-current asset at December 31, 2017 and has been eliminated with the acquisition accounting at June 30, 2018.

Laramide Note Receivable

As part of the consideration for the sale of Hydro Resources, Inc., the Company currently holds a $3.5 million promissory note, secured by a mortgage over the Churchrock and Crownpoint projects. The note has a three-year term and carries an initial interest rate of 5% which then increases to 10% upon Laramide’s decision regarding commercial production at the Churchrock project. Principal payment of $1.5 million is due and payable on January 5, 2019, with the balance of $2.0 million due and payable on January 5, 2020. Interest is payable on a quarterly basis. Laramide will have the right to satisfy up to half of each of these principal payments by delivering shares of its common stock to the Company, which shares will be valued by reference to the volume weighted average price (“VWAP”) for Laramide’s common stock for the 20 trading days before the respective anniversary of January 5, on which each payment is due. The fair value of the notes receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%.

Laramide made the first required principal payment of $1.5 million on the promissory note in January 2018, consisting of $750,000 in cash and the issuance of 1,982,483 of Laramide’s common shares. Also, Laramide has made interest payments of $0.3 million in cash for the six months ending June 30, 2018.

The following tables show the notes receivable, accrued interest and unamortized discount on the Company’s notes receivable as of June 30, 2018 and December 31, 2017.

	June 30, 2018
(thousands of dollars)	Note Amount		Plus Accrued Interest		Less Unamortized Note Discount			Note Balance per Balance Sheet
Current Assets
Notes receivable Laramide – current	$	1,500	$	-	$	-		$	1,500
Subtotal Notes Receivable – current	$	1,500	$	-	$	-		$	1,500
Non-current Assets
Notes receivable – Laramide – non-current	$	2,000	$	-	$	(758	)	$	1,242
Total Notes Receivable – current and non-current	$	3,500	$	-	$	(758	)	$	2,742

	December 31, 2017
(thousands of dollars)	Note Amount		Plus Accrued Interest		Less Unamortized Note Discount			Note Balance per Balance Sheet
Current Assets
Notes receivable Laramide – current	$	1,500	$	250	$	-		$	1,750
Subtotal Notes Receivable – current	$	1,500	$	250	$	-		$	1,750
Non-current Assets
Notes receivable – Laramide – non-current	$	3,500	$	-	$	(1,005	)	$	2,495
Notes receivable – Alabama Graphite Corp.		832		1		-			833
Subtotal Notes Receivable – non-current	$	4,332	$	1	$	(1,005	)	$	3,328
Total Notes Receivable – current and non-current	$	5,832	$	251	$	(1,005	)	$	5,078