Note 6 - Related Party

6 Months Ended

Jun. 30, 2011

Related Party Transactions Disclosure [Text Block]

Note 6 – Related Party

Accounts Payable

As of June 30, 2011 we owed Voyager Oil and Gas (VOY), a Company that merged with our former parent company, Ante4, Inc., $120,000 related to sub-lease deposits to be repaid on office space leased in California, as well as, $48,666 in state taxes, based on an income tax examination related to the 2009 tax year.  In addition, VOY paid an additional $37,903 in California payroll taxes related to an underpayment by Ante4 from 2010.  The amounts have been included in accounts payable and total $206,569.  We have paid $86,569 of this amount subsequent to June 30, 2011.  We also incurred, and paid, VOY $11,417 on June 24, 2011 pursuant to a federal tax examination related to the 2009 federal tax year.

Option Awards

On February 22, 2011, we granted 500,000 stock options to James Moe, our chief financial officer.  The options vest annually over three years beginning on March 14, 2012 and are exercisable until February 21, 2021 at an exercise price of $1.65 per share.  The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 108% and a call option value of $1.3661, was $683,070, and is being amortized over the implied service term, or vesting period, of the options.  The Company recognized $66,410 of compensation expense during the six months ended June 30, 2011.

Financing Arrangement

On May 2, 2011, we entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with certain lenders (collectively, the “Lenders” and individually a “Lender”) and Prenante5, LLC, as agent for the Lenders (PrenAnte5, LLC, in such capacity, the “Agent”).  The facility provides $10 million in financing to be made available for drilling projects on the Company’s North Dakota Bakken and Three Forks position.  The facility will be available for a period of three years over which time we may draw on the line seven times, pay the line down three times, and terminate the facility without penalty one time.  The facility sets the minimum total draw at $500,000 and requires Ante5, upon each draw, to provide the Lender with a compliance certificate that, along with other usual and customary financial covenants, states that Ante5 has at least twelve months interest coverage on its balance sheet in cash.

Morris Goldfarb, one of the Company’s directors, is participating as a Lender through the Agent with a commitment amount of $1.5 million in the facility.  In consideration for his participation through the agent, Mr. Goldfarb was issued 75,000 warrants (his pro-rata share as a Lender) with the same terms and conditions as the other warrants issued in connection with the closing of the Credit Agreement.  The warrants vest on the earlier of the 1 year anniversary of the grant date (May 2, 2012) or when 50% of the LOC has been advanced, and are exercisable until May 1, 2016 at an exercise price of $0.95 per share.  The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 97% and a call option value of $0.7837, was $58,781, and is being amortized over the three year life of the credit agreement.  The Company recognized $3,266 of compensation expense during the six months ended June 30, 2011.

Other Related Party Transactions

Our former President and Chief Executive Officer, Steve Lipscomb, receives a commission of 5% of a royalty stream from Peerless Media Ltd., recorded on the balance sheet as a contingent consideration receivable, in perpetuity as a result of an incentive arrangement with Mr. Lipscomb that was approved by Ante4’s Board of Directors in February 2009.  Mr. Lipscomb has received a total of $4,320 in commissions during the six months ended June 30, 2011.  Mr. Lipscomb also has been retained as a consultant at a rate of $4,167 per month.  As of June 30, 2011 we owed Mr. Lipscomb $12,363 as reported within accounts payable on the balance sheet as of June 30, 2011.

We sublease office space on a month to month basis where the lessor is an entity owned by our CEO, Bradley Berman for approximately $1,053 per month.  We have paid a total of $6,647 to this entity during the six months ended June 30, 2011.

During the six months ended June 30, 2011, we paid $8,633 to an entity owned by our CEO, Bradley Berman for administrative services provided, of which, $3,451 remained unpaid and reported within accounts payable on the balance sheet as of June 30, 2011.