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Commitments and Contingencies
3 Months Ended
Jul. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 16 - COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

The Company from time to time is involved in various claims and lawsuits incidental to the conduct of its business in the ordinary course. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

 

Acquisition-Related Contingencies

 

On August 8, 2019, the Company and 212 Technologies, LLC (“212 Technologies”) entered into a Stipulation at a JAMS mediation in Los Angeles pursuant to which the parties mutually agreed to execute a “Release and Settlement Agreement” (the “Settlement Agreement”). Pursuant to the Stipulation, the Settlement Agreement will accomplish the following: (i) rescission of that certain “Stakeholder & Investment Agreement” dated May 25, 2017 (“SIA”) (resulting in the return of 5,628,750 shares of the Company’s Series A Preferred Stock by 212 Technologies and the return of a 24% ownership stake in 212 Technologies by the Company) and (ii) the termination of that certain “Software License Agreement” dated June 12, 2018 (the “SLA”), executed by and between 212 Technologies and Elepreneurs, LLC, a wholly owned subsidiary of the Company (“Elepreneurs”). In connection with the execution of the Settlement Agreement, Elepreneurs has agreed to dismiss, with prejudice, a lawsuit it had previously filed in the State District Court of Texas concerning the functionality of the mobile application produced by 212 Technologies under the SLA. The Settlement Agreement is anticipated to be fully executed no later than September 30, 2019.

 

Pursuant to the Settlement Agreement, the parties have reached mutually accommodating terms and have resolved all issues between their respective companies. The Settlement Agreement is anticipated to be fully executed no later than September 30, 2019.

 

In October 2017, the Company entered into a Share Exchange Agreement pursuant to which it acquired a 25% equity interest in 561 LLC. Pursuant to the terms of the Share Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in 561 LLC to 40% in exchange for 2,500,000 shares of its Series A Preferred Stock. Under the terms of the Share Exchange Agreement, the sellers shall be entitled to an additional 2,500,000 shares of our Series A Preferred Stock when both of the following conditions have been met: (a) one year has passed from the Closing Date and (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by OTC Markets. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

 

In October 2017, the Company entered into a Share Exchange Agreement pursuant to which it acquired a 25% equity interest in America Approved Commercial LLC (“AAC”). Pursuant to the terms of the Share Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in AAC to 40% in exchange for 2,500,000 shares of its Series A Preferred Stock. Under the terms of the Share Exchange Agreement, the sellers shall be entitled to an additional 2,500,000 shares of the Company’s Series A Preferred Stock when both of the following conditions have been met: (a) one year has passed from the Closing Date and (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by OTC Markets. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

 

Other Matters

 

In January, 2019, the Company became aware of an unliquidated amount of potential liability arising from a series of cash advance loan transactions (“Transactions”) entered into by eight different lending sources and an entity owned by a former Company employee-insider. Without the knowledge of the Company and in contravention of the express provisions of the Nevada Revised Statutes and Bylaws of the Company, this former employee also purported to obligate the Company (and two of the Company’s affiliates) to repay the amounts owed in connection with the Transactions. At this time, the Company has resolved all of the debt associated with the Transactions at a substantial discount from the amounts alleged by the holders of such debt. Additionally, the Company has entered into a comprehensive agreement, secured by substantial assets, with the former employee-insider and the entity owned by the former Company employee-insider. Pursuant to such agreement, the former employee-insider and the entity owned and controlled by such former Company employee-insider are obligated jointly and severally to repay the Company all sums expended by the Company in the resolution of the Transactions. The amount expended by the Company, in connection with such resolution, is the sum of $3.4 million. At April 30, 2019, the Company has recorded a receivable of $3.4 million from the former employee-insider and the entity owned by the former Company employee-insider and is reported in accounts receivable, related party in our consolidated balance sheet.

 

In June 2019, the Company became aware of a potential liability arising out of certain previous transactions involving the formation and capitalization of two legal entities affiliated with a Company consultant who was, at the time, considered a Company insider. Without the knowledge of the Company and in contravention of the express provisions of the Nevada Revised Statutes and Bylaws of the Company, this Company consultant purportedly solicited investment funds from various persons, who at the time, were independent contractors of the Company. While this matter is still currently under investigation, the Company has reason to believe that this Company consultant, possibly acting in concert with others, sought to leverage the assets and resources of the Company in furtherance of these ventures, to their personal pecuniary benefit. Upon learning of these allegations from various of these investors, the Company launched an immediate internal investigation into these transactions. In addition, the Company secured the services of a Dallas-based law firm with experience in financial impropriety and forensic investigations to assist in that process. The Company believes that it is probable that these actions have resulted in a material loss to the investing parties and is evaluating the potential exposure of these events to the Company.

 

On August 7, 2019, the Company received a letter from Entrepreneur Media, Inc. (“EMI”) notifying the Company that EMI believes that the Company’s pending trademark application for the word “Elepreneurs” would confuse consumers due to the purported similarity to EMI’s existing trademark for the word “Entrepreneur.” The Company believes that this claim is without merit.

 

Based on the foregoing, the Company does not believe that the ultimate resolution of these matters will have a material future effect on its financial statements.