Notes Receivable

9 Months Ended

Sep. 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. Total loan advances up to the closing of the acquisition on April 23, 2018 was $1.8 million with accrued interest receivable of $13,457. During 2018, advances under the loan were $0.9 million and accrued interest was $12,227.

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. (HRI), 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%.

As of September 30, 2018, the Company has received two tranches of Laramide common shares as partial consideration for the sale of HRI, which has resulted in the receipt of 2,218,133 and 1,982,483 Laramide common shares in January 2017 and January 2018, respectively. These share payments represent the initial consideration from the January 2017 sale of HRI and the first note installment in January 2018. The first note installment in the amount of $1.5 million in January 2018, consisted of $750,000 in cash and the issuance of 1,982,483 of Laramide’s common shares. Additionally, Laramide has made interest payments of $0.4 million in cash for the nine months ending September 30, 2018.

For the three months ended September 30, 2018, the Company sold the second tranche of 1,982,483 Laramide common shares resulting in net proceeds of $0.4 million and a net loss on sale of marketable securities of $0.4 million. For the nine months ended September 30, 2018, the Company sold the first and second tranches of 4,200,816 Laramide common shares resulting in net proceeds of $0.8 million and a net loss on sale of marketable securities of $0.5 million.

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

	September 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	$	-	$	(632	)	$	1,368
Total Notes Receivable – current and non-current	$	3,500	$	-	$	(632	)	$	2,868

	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