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Related Party Transactions
3 Months Ended
Jul. 31, 2016
Related Party Transactions [Abstract]  
Related Party Transactions

Employment Agreements

 

On October 30, 2015, Mr. Stephen Brunner joined the Company as President.  Mr. Brunner has been tasked with making oil and gas related decisions and execute the Company’s growth strategy. Under the terms of the contract, Mr. Brunner receives a base $10,000 per month. Mr. Brunner was also granted 53,244 stock options. He also has the right to purchase an additional 1.75% of the Company’s common stock subject to shareholder approval on the increase of the current stock option plan and achieving pre-defined target objectives.

 

The Company computed the fair value of the grant as of the date of grant utilizing a Black-Scholes option-pricing model using the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $1.78; exercise price of $2.00; expected volatility of 171%; and a discount rate of 2.16%. The grant date fair value of the award was $89,525. For the three months ended July 31, 2016 and 2015, the Company expensed $6,101 and $0, respectively, to general and administrative expenses.

 

MegaWest Transaction

 

On October 15, 2015, the Company entered into a contribution agreement, with MegaWest and Fortis, a Delaware limited liability company, pursuant to which the Company and Fortis each agreed to contribute certain assets to MegaWest in exchange for shares of MegaWest common stock. See Note 1 above.

 

Accounts Receivable - Related Party

 

As discussed in Note 1 above, on October 15, 2015, the Company entered into the Contribution Agreement with MegaWest and Fortis pursuant to which the Company and Fortis each agreed to assign certain assets to MegaWest in exchange for the MegaWest Shares.

 

Upon execution of the Contribution Agreement, Fortis transferred certain indirect interests held in 30 condominium units and the rights to any profits and proceeds therefrom, with its basis of $15,544,382, to MegaWest. As of July 31, 2016 and April 30, 2016, the Company had an accounts receivable – related party in the amount of $2,664,931 and $4,829,693, respectively, which was due from Fortis for the profits belong to MegaWest, see Note 5 above.  

 

Notes Receivable – Related Party

 

As discussed in Note 6, the Company entered into seven promissory note agreements with Fortis, with total principal amount of $20,795,129. The notes receivable bear interest at an annual interest rate of 3% and mature on December 31, 2017. For the three months ended July 31, 2016, the Company recorded $141,259 of interest income on the notes receivable. As of July 31, 2016 and April 30, 2016, the outstanding balance of the notes receivable was $20,795,129 and $17,848,000, respectively.

 

Notes Payable – Related Party

 

On December 1, 2015, the Company issued a non-recourse promissory note, in the principal amount of $750,000 to Horizon Investments (“Note A”), the proceeds of which are to be used for working capital purposes. Interest on Note A is due upon the earlier to occur of closing of the Horizon Transaction, or December 31, 2016. Amounts due under the terms of Note A accrue interest at an annual rate equal to one half of one percent.

 

On December 7, 2015, the Company entered into the Horizon Transaction, pursuant to which the Company executed a purchase agreement to acquire Horizon Investments in an all-stock deal. See Note 4. Mr. Scot Cohen, the Company’s Executive Chairman, is the sole Manager of Horizon Investments. In addition, Mr. Cohen owns a 9.2% membership interest in Horizon Investments. Horizon Investments owns a 20% interest in Horizon Energy Partners.  Mr. Cohen owns a 2.8% membership interest in Horizon Energy Partners.

 

On January 13, 2016, the Company issued a second non-recourse promissory note in the principal amount of $750,000 ("Note B") to Horizon Investments. All of the proceeds from Note B were used to fund Petro UK's obligations under the terms of the Farmout Agreement, and were deposited into the Escrow Agreement. The principal and all accrued and unpaid interest on Note B is due upon the earlier to occur of closing of the transactions contemplated under the terms of the Purchase Agreement. Amounts due under the terms of Note B accrue interest at an annual rate equal to one half of one percent.

 

 

On April 7, 2016, the Company issued a third non-recourse promissory note in the principal amount of $100,000 ("Note C") to Horizon Investments. All of the proceeds from Note C were used to fund working capital requirements. The principal and all accrued and unpaid interest on Note C is due upon the earlier to occur of closing of the transactions contemplated under the terms of the Purchase Agreement. Amounts due under the terms of Note C accrue interest at an annual rate equal to one half of one percent.

 

Upon the close of the Horizon transaction on May 3, 2016, the above notes were paid off.