PART III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
The Company’s Board of Directors (the
“Board”) and executive officers consist of the
persons named in the table below. Each director serves for a
one-year term, until his or her successor is elected and qualified,
or until earlier resignation or removal. Our Bylaws provide that
the Board shall consist of not less than one, nor more than ten
directors. The Company’s Board is currently comprised of four
directors. The directors and executive officers are as
follows:
|
Name
|
|
Age
|
|
Title
|
|
Scot Cohen
|
|
50
|
|
Executive Chairman
|
|
Stephen Brunner
|
|
61
|
|
President
|
|
David Briones
|
|
43
|
|
Chief Financial Officer
|
|
Glenn C. Pollack
|
|
61
|
|
Director
|
|
John Wallace
|
|
45
|
|
Director
|
|
Fred Zeidman
|
|
73
|
|
Director
|
Scot Cohen,
Executive Chairman. Mr. Cohen
has over 20 years of experience in institutional asset management,
wealth management, and capital markets. Mr. Cohen is the
Founder and Managing Partner of V3 Capital Partners, a private
investment firm focused on early-stage companies primarily in the
consumer products industry. Prior to creating V3 Capital Partners,
Mr. Cohen was the founder and principal of the Iroquois Capital
Opportunity Fund, a closed end private equity fund focused on
investments in North American oil and gas assets. He was also
the co-founder of Iroquois Capital, a New York based hedge
fund. In addition, he manages several operating and
non-operating partnerships, which actively invest in the energy
sector.
Prior
to founding Iroquois Capital, Mr. Cohen founded a merchant bank
based out of New York, which was one of the most active
participants in structured investments in public companies (PIPES)
in the United States over the four-year period he was actively
managing the business. Mr. Cohen began his career at
Oppenheimer and Company in a sales capacity and transitioned from
there to a boutique investment-banking firm, where he spent two
years. Scot currently sits on the board of directors of Charlie's
Holdings, Inc. (OTCBB: CHUC) and Wrap Technologies, Inc. (OTCQB:
WRTC), as well as several private companies, and is involved a
number of charitable ventures. Mr. Cohen earned a Bachelor of
Science degree from Ohio University in 1991.
The
Board’s Nomination Committee believes Mr. Cohen’s
extensive investment banking experience advising oil and gas
companies, as well as his operational expertise developing oil and
gas assets, is valuable to the Board of Directors and its
deliberations, and is particularly beneficial as the Company
continues to develop its oil and gas assets.
Stephen Brunner, President. Mr.
Brunner was
appointed President on October 30, 2015. Prior to joining the
Company, Mr. Brunner served as President and Chief Executive
Officer of Sanchez Production Partners LLC (NYSE: SPP), formerly
Constellation Energy Partners LLC (“Sanchez
Production”), from March
2008 until March 2015, and served as a member of the board of
managers of Sanchez Production from December 2008 until August
2011. Mr. Brunner also served as Vice President for
Constellation Energy Commodities Group, Inc. from February 2008 to
January 2009. Mr. Brunner holds a B.S. in Petroleum Engineering
from Louisiana Tech University.
David
Briones, Chief Financial Officer. Mr. Briones was appointed Chief Financial Officer
on August 15, 2013. Since October 1, 2010, Mr. Briones has acted as
the managing member of Brio Financial Group, LLC, a financial
reporting consulting firm. From January 2006 through September
2010, Mr. Briones managed the public company and hedge fund
practices at Bartolomei Pucciarelli, LLC
(“BP”).
Within that capacity, Mr. Briones performed audit services,
outsourced CFO functions, and/or consulted clients through
difficult SEC comment periods, particularly through the application
of complex accounting principles for a vast public company client
base. BP is a registered firm with the Public Company Accounting
Oversight Board. BP is an independent member of the BDO Seidman
Alliance. Mr. Briones served as the chief financial officer of NXT
Nutritionals Holdings, Inc. from February 2009 to May 2012. Mr.
Briones also served as the CFO of Clear-Lite Holdings, Inc. from
August 2009 to March 2011. Prior to joining BP, Mr. Briones was an
auditor with PricewaterhouseCoopers LLP in New York, New York. Mr.
Briones specialized in the financial services group, and most
notably worked on the MONY Group, Prudential Financial, and MetLife
initial public offerings.
Glenn C.
Pollack, Director. Mr. Pollack
is a Managing Director and Founder of Candlewood Partners, LLC
(“Candlewood”), a merchant bank focused on middle market
corporate finance and infrastructure projects, and is the Manager
of Green Bull Georgia Partners, LLC, a special purpose vehicle
controlled by Mr. Pollack established to purchase certain senior
debt of Register Communications, Inc. (“Register”). In connection with the purchase of the
senior debt, Mr. Pollack became a director of Register, which filed
for Chapter 11 protection under the United States Bankruptcy Code
in December 2015. Prior to founding Candlewood, Mr. Pollack was a
Managing Director and Principal of a middle market investment
banking firm with offices in Chicago and Cleveland. He was
responsible for the Restructuring Group and was involved in other
corporate finance transactions, including mergers and acquisitions
and capital raising for special situations. He also spent five
years as the CEO of a regional distributor of perishable foods with
annual revenues of $180 million and over 250 employees in four
states. Mr. Pollack is a certified public accountant and has worked
for Price Waterhouse as a consultant and for Deloitte as an
auditor.
The
Board’s Nomination Committee believes Mr. Pollack’s
success with multiple investment banking firms, his extensive
contacts within the investment community, his executive management
experience and financial and accounting expertise will assist the
Company’s efforts to raise capital to fund the continued
implementation of the Company’s business plan.
John
Wallace, Director. Mr. Wallace graduated from Syracuse University in
May 1996 with a Bachelor’s of Science degree in sociology.
From June 1996 through May 2004, Mr. Wallace was a professional
basketball player associated with the National Basketball
Association (“NBA”). Since April 2009, Mr. Wallace has been
an alumni relations and fan development representative for the New
York Knicks, a professional basketball team aligned with the NBA.
In that capacity, Mr. Wallace works on community public relations
and fan development initiatives, along with sponsorship and
marketing programs. In January 2013, Mr. Wallace joined Hotaling
Insurance Group as an insurance agent. In February 2013, Mr.
Wallace became an Executive Board Member of Heavenly Productions
Foundation, a not for profit charitable organization dedicated to
helping children in need or in distress. Since October 2007, Mr.
Wallace has served as Vice President of Winning Because I Tried, a
non-profit he co-founded in 2007, and whose focus is on academic
success, social interaction, peer pressure awareness, and sound
decision-making for children ages 8-18. Since 2006, Mr. Wallace has
been President and General Manager of Rochester AAU Basketball, a
program he founded in March 2006, which is designed to leverage
sports as a means for youth to obtain a college
education.
The
Board’s Nomination Committee believes that Mr. Wallace brings
effective management and leadership skills to the Board of
Directors, which assists the Board and management in in developing
its organization and business plan.
Fred
Zeidman, Director. Mr. Zeidman has served as Director of the Company
since September of 2012. Mr. Zeidman also served as a director of
Straight Path Communications Inc. from September 2013 to February
2018, Hyperdynamics Corporation from December 2009 to October 2017,
and as a director of Prosperity Bancshares, Inc. from 2004 to 2007.
In addition, he has served as trustee for the AremisSoft
Liquidating Trust since 2004. In March 2008, Mr. Zeidman was
appointed the Interim President of Nova Biosource Fuels, Inc.
(“Nova”), a publicly traded biodiesel technology
company, and served in that position until the company’s
acquisition in November 2009. Mr. Zeidman also served as a director
of Nova from June 2007 to November 2009. From August 2009 through
November 2009, Mr. Zeidman served as Chief Restructuring Officer
for Transmeridian Exploration, Inc. He also served as CEO,
President and Chairman of the Board of Seitel Inc., an oil field
services company, from June 2002 until its sale in February 2007.
Mr. Zeidman served as a Managing Director of the law firm Greenberg
Traurig, LLP from July 2003 to December 2008. Mr. Zeidman has
served as CEO, Interim CEO and Chairman of the Board of a variety
of companies, including several in the oil and gas sector. Mr.
Zeidman was the Chairman Emeritus of the United States Holocaust
Memorial Council, a position he was appointed to by former
President George Bush in March 2002, and in which he served from
2002-2010. He is also Chairman Emeritus of the University of Texas
Health Science System Houston and is on the Board of Trustees of
the Texas Heart Institute, where he currently serves as Interim
Chief Financial Officer. Mr. Zeidman received his Bachelor of
Science from Washington University and a Masters of Business
Administration from New York University.
The
Board’s Nomination Committee believes that Mr.
Zeidman’s extensive experience as an executive in senior
management positions, including with oil and gas exploration, oil
services and related companies, together with his legal and board
experience, add significant value to the Company and its Board of
Directors in assessing challenges and in addressing organizational
and development issues facing the Company.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company’s directors, executive officers and persons who
own more than 10% of a registered class of the Company’s
equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Directors, officers and
greater than 10% stockholders are required to furnish the Company
with copies of all Section 16(a) forms they file.
To
the Company’s knowledge, based solely on a review of the
copies of such reports furnished to the Company, with respect to
the fiscal year ended April 30, 2019, we believe that all reports
required to be filed by these individuals and persons under Section
16(a) were filed and that such filings were
timely.
Non-Executive Director Compensation for the Year Ended April 30,
2019
The
Company has no formal arrangement pursuant to which directors are
compensated for their services in their capacity as directors,
except for the granting from time to time of incentive stock
options. During the years ended April 30, 2019 and 2018, no
compensation was paid to any of the Company’s non-executive
directors.
Term of Office
Pursuant
to our Bylaws, each member of our Board of Directors shall serve
from the time they are duly elected and qualified until the next
Annual Meeting of stockholders or until their death, resignation or
removal from office.
Director Independence
The
Board believes that a majority of its members should be independent
directors. The Board has determined that, other than Mr. Cohen, all
of its current directors, as well as each of the nominees for
election, are independent directors as defined by the rules and
regulations of the NASDAQ Stock Market.
The members of the Audit Committee and Compensation
Committee of the Board each meet the independence standards
established by the NASDAQ Stock Market and the U.S. Securities and
Exchange Commission (the “SEC”) for audit committees and compensation
committees. In addition, the Board has determined that of its
current directors, Mr. Pollack satisfies the definition of an
“audit committee financial expert” under SEC rules and
regulations. These designations do not impose any duties,
obligations or liabilities that are greater than those generally
imposed as members of the Audit Committee and the Board, and the
designation as audit committee financial expert does not affect the
duties, obligations or liability of any other member of the Audit
Committee or the Board.
Board of Directors Meetings and Committees
The Board held two meetings during the fiscal year
ended April 30, 2019. Each director attended, either in person or
telephonically, at least 75% of
the aggregate meetings of the Board of Directors and meetings of
committees on which he served during his tenure as a director or
committee member.
Audit Committee
Our
Audit Committee currently consists of three directors, Glenn
Pollack, Fred Zeidman and John Wallace, each of whom are
“independent” as independence is currently defined in
the NASDAQ Stock Market Rules and SEC rules and regulations. The
Board has determined that Glenn Pollack qualifies as an
“Audit Committee financial expert,” as defined in
applicable SEC rules implementing Section 407 of the Sarbanes-Oxley
Act of 2002. The Board made a qualitative assessment of Mr.
Pollack’s level of knowledge and experience based on a number
of factors, including his formal education and experience. The
Audit Committee held one meeting during the fiscal year ended April
30, 2019.
The
Audit Committee is responsible for overseeing the Company’s
corporate accounting, financial reporting practices, audits of
financial statements and the quality and integrity of the
Company’s financial statements and reports. In addition, the
Audit Committee oversees the qualifications, independence and
performance of the Company’s independent auditors. In
furtherance of these responsibilities, the Audit Committee’s
duties include the following: evaluating the performance of and
assessing the qualifications of the independent auditors;
determining and approving the engagement of the independent
auditors to perform audit, review and attest services and
performing any proposed permissible non-audit services; evaluating
employment by the Company of individuals formerly employed by the
independent auditors and engaged on the Company’s account and
any conflicts or disagreements between the independent auditors and
management regarding financial reporting, accounting practices or
policies; discussing with management and the independent auditors
the results of the annual audit; reviewing the financial statements
proposed to be included in the Company’s Annual Report on
Form 10-K; discussing with management and the independent auditors
the results of the auditors’ review of the Company’s
quarterly financial statements; conferring with management and the
independent auditors regarding the scope, adequacy and
effectiveness of internal auditing and financial reporting controls
and procedures; and establishing procedures for the receipt,
retention and treatment of complaints regarding accounting,
internal accounting control and auditing matters and the
confidential and anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. The Audit
Committee operates under the written Audit Committee Charter
adopted by the unanimous written consent of the Board. A copy
of the Audit Committee Charter is available on the Company’s
website.
Compensation Committee
Our
Compensation Committee is currently comprised of two directors,
Glenn Pollack and Fred Zeidman, each of whom is independent as
independence is currently defined in the NASDAQ Stock Market Rules
and SEC rules and regulations. The Compensation Committee held no
meetings during the year ended April 30, 2019.
The
Compensation Committee reviews, and as it deems appropriate,
recommends to the Board, policies, practices, and procedures
relating to the compensation of the officers and other managerial
employees, and the establishment and administration of employee
benefit plans. It advises and consults with the officers of the
Company as may be requested regarding managerial personnel
policies. The Compensation Committee also has such additional
powers as may be conferred upon it from time to time by the
Board.
The
Compensation Committee operates under the written Compensation
Committee Charter that was adopted by the unanimous written consent
of the Board. A copy of the Compensation Committee Charter is
available on the Company’s website.
Nominating and
Corporate Governance Committee
The Nominating and Corporate Governance Committee
is currently comprised of two directors, Glenn Pollack and Fred
Zeidman, each of who is independent as independence is currently
defined in the NASDAQ Stock Market Rules and SEC rules and
regulations. No
meetings of the Nominating and
Corporate Governance Committee were held during the year ended
April 30, 2019.
The
Nominating and Corporate Governance Committee is responsible for
making recommendations to the Board of Directors regarding
candidates for directorships and the size and composition of the
Board. In addition, the Nominating and Corporate Governance
Committee is responsible for overseeing our corporate governance
guidelines and reporting and making recommendations to the Board
concerning corporate governance matters.
Board Nominations
In
lieu of a formal Board Nomination Committee, Board nomination
decisions are made by the independent directors of the Board. The
independent directors prepare a list of candidates to fill the
expiring terms of directors serving on our Board, which they then
submit to the Board who determines which candidates will be
nominated to serve on the Board. The names of nominees are then
submitted for election at our Annual Meeting of Stockholders. The
independent directors also submit to the entire Board a list of
nominees to fill any interim vacancies on the Board resulting from
the departure of a member of the Board for any reason prior to the
expiration of his term. In recommending nominees, the independent
directors are to consider various criteria, including general
business experience, general financial experience, knowledge of the
Company’s industry (including past industry experience),
education, and demonstrated character and judgment. The independent
directors will also consider director nominees recommended by a
stockholder if the stockholder mails timely notice to the Secretary
of the Company at its principal offices. Any person nominated by a
stockholder for election to the Board will be evaluated based on
the same criteria as all other nominees.
Board Leadership Structure
Our Board has discretion to determine whether to
separate or combine the roles of Chief Executive Officer and
Chairman of the Board. Scot Cohen has served in both roles since
2013, and our Board continues to believe that his combined role is
most advantageous to the Company and our stockholders, as
Mr. Cohen possesses in-depth knowledge
of the issues, opportunities and risks facing us, our business and
our industry and is best positioned to fulfill the responsibilities
of our Chief Executive Officer, as well as the Chairman’s
responsibility to develop meeting agendas that focus the
Board’s time and attention on the most critical matters and
to facilitate constructive dialogue among Board members on
strategic issues.
In
addition to Mr. Cohen’s leadership, the Board maintains
effective independent oversight through a number of governance
practices, including, open and direct communication with
management, input on meeting agendas, and regular executive
sessions.
Board Role in Risk Assessment
Management,
in consultation with outside professionals, as applicable,
identifies risks associated with the Company’s operations,
strategies and financial statements. Risk assessment is also
performed through periodic reports received by the Audit Committee
from management, counsel and the Company’s independent
registered public accountants relating to risk assessment and
management. Audit Committee members meet privately in executive
sessions with representatives of the Company’s independent
registered public accountants. The Board also provides risk
oversight through its periodic reviews of the financial and
operational performance of the Company.
Code of Ethics and Business Conduct
We have adopted a code of ethics that applies to
all of our executive officers, directors and employees. Code of
ethics codifies the business and ethical principles that govern all
aspects of our business. This document will be made available in
print, free of charge, to any stockholder requesting a copy in
writing from the Company, and is available on our corporate website
at http://petroriveroil.com.
Our
current Code of Ethics became effective July 3, 2013. A copy of our
Code of Ethics was attached as an exhibit to our Transition Report
on Form 10-K, filed on August 28, 2013.
Indemnification of Officers and Directors
As
permitted by the Delaware General Corporation Law, the
Company will indemnify its directors and officers against
expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action
brought against them on account of their being or
having been Company directors or officers
unless, in any such action, they are adjudged to have acted
with gross negligence or willful misconduct.
Stockholder Communications with the Board of Directors
Our
Board of Directors provides stockholders with the ability to send
communications to the Board of Directors, and stockholders may do
so at their convenience. In particular, stockholders may send their
communications to:
Attn: Corporate Secretary
Petro River Oil Corp.
55 5th Avenue, Suite 1702
New York, New York 10003
All
communications received by the Corporate Secretary are relayed to
the Board of Directors of the Company.
ITEM 11. EXECUTIVE
COMPENSATION
Summary Compensation Table
The following table sets forth information
concerning the compensation paid to the Company’s Executive
Chairman, and the Company’s two most highly compensated
executive officers other than its Executive Chairman, who were
serving as executive officers as of April 30, 2019 and whose annual
compensation exceeded $100,000 during such year (collectively the
“Named Executive
Officers”).
Name and
Principal Position
|
|
|
|
|
|
Nonequity
Incentive plan
compensation
$
|
Nonqualified
Deferred
compensation earnings
$
|
|
|
|
Scot Cohen, Chief Executive Officer, Executive
Chairman (2)
|
2019
|
157,500
|
-
|
114,583
|
-
|
-
|
-
|
-
|
272,083
|
|
2018
|
157,500
|
-
|
-
|
170,147
|
-
|
-
|
-
|
327,647
|
|
Stephen
Brunner, President
|
2019
|
35,000
|
|
68,750
|
104,580
|
-
|
-
|
-
|
178,330
|
|
2018
|
71,657
|
-
|
-
|
183,827
|
-
|
-
|
-
|
255,484
|
|
David
Briones, Chief Financial Officer
|
2019
|
60,000
|
-
|
-
|
-
|
-
|
-
|
|
60,000
|
|
2018
|
55,000
|
-
|
-
|
2,190
|
-
|
-
|
-
|
57,190
|
|
(1)
|
“Option awards” include the expense recorded for all
options granted by us as compensation for employment services or
office during the current and prior years.
|
|
(2)
|
Of the total cash compensation paid to Mr. Cohen, $57,500 and $0
was paid to V3 Capital Partners, LLC and North Haven Equities, LLC,
respectively, during the fiscal year ended April 30, 2019, and
$75,000 and $30,000 was paid to V3 Capital Partners, LLC and North
Haven Equities, LLC, respectively, during the fiscal year ended
April 30, 2018; each entity is a single member limited liability
company owned by Mr. Cohen.
|
The Company’s compensation program is
designed to provide our executive officers with competitive
remuneration and to reward their efforts and contributions to the
Company. Elements of compensation for our executive officers
include base salary and bonuses paid as stock options pursuant to
the Company’s Amended and Restated 2012 Equity Compensation
Plan (the “Plan”). Company performance does not play a
significant role in the determination of base
salary.
The
Compensation Committee, working in conjunction with the Executive
Chairman, reviews and makes recommendations to the Board regarding
all forms of compensation to be provided to officers and directors
of the Company, including all bonus and stock compensation. The
Compensation Committee may also set general compensation goals and
guidelines for the Company’s employees from time to
time.
Employment Agreements
Scot Cohen
On April 23, 2013, the Company entered into an
Employment Agreement with Scot Cohen, the Company’s Executive
Chairman (the “Employment
Agreement”). Under the
terms of the Employment Agreement, Mr. Cohen will be entitled to
all earned but unpaid salary, expense reimbursements, bonuses (if
applicable), and any vested benefits, upon termination of the
Employment Agreement by the Company for cause, by Mr. Cohen without
good reason, or upon the Employment Agreement’s expiration
date in the event Mr. Cohen does not choose to renew his contract.
In the event Mr. Cohen’s employment is terminated by the
Company without cause, upon a change in control of the Company, or
by Mr. Cohen for good reason, he shall be entitled to any accrued
obligations (detailed in the preceding sentence), severance in a
single lump sum installment in an amount equal to twice the sum of
the base salary in effect on the termination date plus two times
the maximum annual bonus for which Mr. Cohen was eligible in the
fiscal year in which the termination date occurred, a pro-rata
portion of Mr. Cohen’s annual bonus for the fiscal year in
which the termination occurred, and a full vesting in the initial
grant and in any and all previously granted outstanding
equity-based incentive awards subject to time-based vesting
criteria.
On November 20, 2013, the Company and Mr. Cohen
entered into an amendment (the “Amendment”) to the Employment Agreement. Under the
terms of the Amendment, the Company substituted a stock option
grant of 208,333 fair market value stock options under the Plan, at
the exercise price of $11.80 per share, for cash-settled restricted
stock units representing 331,703 shares of the Company’s
Common Stock, which the Company had previously agreed to grant Mr.
Cohen under the terms of the Employment Agreement. These options
vest in five equal installments, with the first 20% vesting
immediately upon grant, and the remaining options vesting in four
equal installments on the anniversary of the grant
date.
Stephen Brunner
On
October 28, 2015, the Company entered into an Employment Agreement
with Stephen Brunner. Pursuant to the terms and conditions of
the Employment Agreement, Mr. Brunner will receive a base salary of
$5,000 per month from January 2016 until March 2016, which amount
will increase to $10,000 per month thereafter, and will be eligible
for an annual bonus, payable in cash and/or equity at the sole
discretion of the Board of Directors. Upon execution of the
Employment Agreement, Mr. Brunner received options to purchase
53,244 shares of the Company’s Common Stock, or 1.25% of the
Company’s outstanding shares of common stock, for $2.00 per
share, subject to certain vesting conditions contained in the
Employment Agreement. Additionally, pursuant to the agreement, upon
completion of certain transactions, including an increase of the
number of shares of Common Stock authorized for issuance under the
Company’s current stock option Plan, Mr. Brunner shall
receive options to purchase an additional 1.75% of the
Company’s outstanding shares of Common Stock.
David Briones
On November 26, 2013, the Company entered into a
consulting agreement with Brio Financial Group
(“Brio”) and its Managing Member, David Briones,
was appointed the Chief Financial Officer of the Company on August
15, 2013. Under the terms of this agreement, as amended, Brio will
receive a monthly consulting fee of $5,000, as well as a grant of
3,750 stock options of the Company pursuant to the Plan. The
options vested in six installments; the first 625 options vested
immediately upon execution of the consulting agreement, and the
remaining five installments vested monthly, on the 26th of each
subsequent month.
Outstanding Equity Awards at April 30, 2019
The
Plan was adopted to promote the success and enhance the value of
the Company by continuing to link the personal interest of
participants to those of its stockholders and by providing
participants with an incentive for outstanding performance. The
Plan is administered by the Board, and all employees of the Company
and its subsidiaries, as determined by the Board, as well as all
members of the Board are eligible to participate. An aggregate of
3.0 million shares of Common Stock are authorized for issuance
under the Plan.
The
Plan was approved at a special meeting of the stockholders on
September 7, 2012, and an amendment to the Plan was approved at the
Company’s Annual Meeting of Stockholders on April 16, 2014.
The following table outlines awards issued to the Company’s
Named Executive Officers and Directors pursuant to the Plan as of
April 30, 2019.
|
|
Number of securities underlying unexercised options
|
|
|
Number of securities underlying unvested options
|
Weighted-average exercise price of outstanding options, warrants,
and rights
|
|
Scot
Cohen
|
208,333
|
$2.00
|
10/21/25
|
-
|
$2.00
|
|
Scot
Cohen
|
889,969
|
$1.38
|
7/11/26
|
-
|
$1.38
|
|
David
Briones
|
5,000
|
$1.98
|
8/4/26
|
-
|
$1.98
|
|
Glenn
Pollack
|
4,237
|
$2.00
|
10/21/25
|
-
|
$2.00
|
|
Glenn
Pollack
|
50,000
|
$1.38
|
7/11/26
|
-
|
$1.38
|
|
John
Wallace
|
4,237
|
$2.00
|
10/21/25
|
-
|
$2.00
|
|
John
Wallace
|
40,000
|
$1.38
|
7/11/26
|
-
|
$1.38
|
|
Fred
Zeidman
|
4,237
|
$2.00
|
10/21/25
|
-
|
$2.00
|
|
Fred
Zeidman
|
50,000
|
$1.38
|
7/11/26
|
-
|
$1.38
|
|
Stephen
Brunner
|
53,244
|
$2.00
|
10/30/25
|
-
|
$2.00
|
|
Stephen
Brunner
|
311,489
|
$1.38
|
7/11/26
|
-
|
$1.38
|
|
Total
|
1,620,746
|
|
|
-
|
|
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of April 30, 2019 regarding
equity compensation plans approved by our security holders and
equity compensation plans that have not been approved by our
security holders:
|
Plan category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected at
left)
|
|
Equity
compensation plans approved by security holders
|
2,567,552
|
$2.14
|
432,448
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|
Total
|
2,567,552
|
$2.14
|
432,448
|
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS
MATTERS
The
following table sets forth information regarding the beneficial
ownership of our Common Stock as of September 27, 2019 for each
person known by us to be the beneficial owner of more than 5% of
our outstanding shares of Common Stock. Unless otherwise indicated,
we believe that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
beneficially owned by them. Set forth below is information
regarding the shares of the Company’s Common Stock which are
owned on September 27, 2019 or which the person has the right to
acquire within 60 days of September 27, 2019 for (i) each director,
executive officer, (ii) all directors and executive officers as a
group, and (iii) each person who is the beneficial owner of more
than five percent of the outstanding shares of the Company’s
Common Stock.
Name and Address of
Beneficial Owner (1)
|
Number of shares beneficially owned
|
Stock options exercisable
within 60 days
|
Percentage of shares
beneficially owned (3)
|
|
|
Scot
Cohen
|
15,627,285(2)
|
1,098,302
|
40.90%
|
Executive
Chairman
|
|
David
Briones
|
-
|
5,000
|
*
|
Chief
Financial Officer
|
|
Stephen
Brunner
|
226,667
|
364,733
|
1.69%
|
President,
Operations
|
|
Glenn
C. Pollack
|
16,709
|
54,237
|
*
|
Director
|
|
John
Wallace
|
-
|
44,237
|
*
|
Director
|
|
Fred
Zeidman
|
-
|
54,237
|
*
|
Director
|
|
All
Directors and Officers as a Group (6 persons)
|
15,970,661
|
1,620,746
|
43.01%
|
|
_________________
* Less than 1%
|
(1)
|
Except where otherwise indicated, the address of the beneficial
owner is deemed to be the same address of the Company.
|
|
|
|
|
(2)
|
Includes (i) 6,286,382 shares held directly by Mr. Cohen, including
2,594,040 shares issuable upon conversion of Series A Preferred,
889,969 shares issuable upon exercise of warrants, and 208,333
shares issuable upon exercise of options; (ii) 725,000 shares held
by Pearsonia West Investments,
LLC, of which Mr. Cohen is a controlling member; (iii) 605,431
shares held by ICO Liquidating Trust, of which Mr. Cohen is a
controlling member; (iv) 36,813 shares held by Structure Oil Corp.,
of which Mr. Cohen is an owner; (v) 34,702 shares held by the Scot
Jason Cohen Foundation, which Mr. Cohen serves as a director; (vi)
2,660,695 shares held by Petro Exploration Funding, LLC, of which
Mr. Cohen is a controlling member, including 1,820,300 shares
issuable upon conversion of Series A Preferred and 840,336 issuable
upon exercise of warrants; and (vii) 4,150,450 shares held by Petro
Exploration Funding II, LLC, of which Mr. Cohen is a controlling
member, including 2,900,450 shares issuable upon conversion of
Series A Preferred and 1,250,000 shares issuable upon exercise of
warrants. As a result of these relationships, the beneficial owner
may be deemed, pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), to beneficially
own all Common Stock directly owned by such
entities.
|
|
|
|
|
(3)
|
Includes stock options exercisable within 60 days of September 27,
2019.
|
|
(4)
|
Includes 166,667 shares held by Brunner Resources,
LLC.
|
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Series A Financing and Debt Conversion
On
January 31, 2019, the Company sold and issued units of its
securities consisting of shares of the Company’s newly
created Series A Preferred shares and five-year warrants to
purchase shares of Company’s common stock, to certain
accredited investors pursuant to a Securities Purchase Agreement
(“SPA”) and to
certain debtholders pursuant to Debt Conversion Agreements (the
“Debt Conversion
Agreements”) (the “Series A
Financing”).
In
connection with the Series A Financing, on January 31, 2019, the
Company entered into an SPA with Scot Cohen, the Company’s Executive
Chairman, pursuant to which Mr. Cohen purchased $737,616 of
units in connection with the sale of units of shares of the Company
Series A Financing (the “Cohen Investment”). In addition,
Mr. Cohen also converted $300,000 and $18,583 of debt and accrued
interest, respectively, owed under the Cohen Loan Agreement, as set
forth below, into units pursuant to a Debt Conversion Agreement
(the “Cohen Debt
Conversion”). As a result of the Cohen Investment and
the Cohen Debt Conversion, the Company issued Mr. Cohen an
aggregate of 51,881 shares of Series A Preferred and warrants to
purchase 2,594,040 shares of the Company’s common
stock.
Horizon Investments, LLC.
On May 3,
2016, the Company consummated the acquisition of Horizon I
Investments, LLC (“Horizon
Investments”). Scot Cohen,
the Company’s Executive Chairman, is the sole managing member
of Horizon Investments, and owned, prior to the Company’s
acquisition of Horizon Investments, a 9.2% membership interest in
Horizon Investments. As a result of the Company’s acquisition
of Horizon Investments, Mr. Cohen received a distribution from
Horizon Investments of 1,379,250 shares of the Company’s
Common Stock. Although Mr. Cohen remains the managing member
of Horizon Investments, he is not paid separately for his
role.
Horizon Investments
owns a 14.52% membership interest in Horizon Energy Partners, LLC
(“Horizon
Energy”). Mr. Cohen
owns a 2.8% membership interest
in Horizon Energy.
Stephen Brunner, the
Company’s President, is a member of Horizon Energy, and owns
a 2.52% membership interest.
Prior to the Company’s acquisition of Horizon Investments,
Mr. Brunner held a 1.68% membership interest in Horizon
Investments, and received a distribution from Horizon Investments
of 166,667 shares of the Company’s Common Stock after the
acquisition.
Horizon Energy Acquisition, LLC.
On February
25, 2019, the Company executed a Subscription Agreement, pursuant
to which the Company purchased 145.454 membership units in Horizon
Energy Acquisition, LLC (“Horizon Acquisition”),
representing an approximate 14.6% membership interest in Horizon
Acquisition, for $400,000 (the “Acquisition of Interest”).
Horizon Acquisition is a company focused on oil and gas exploration
activities. As a result, the Company acquired an additional 5.63%
working interest in an international, offshore exploration project
in the North Sea, which is in addition to a 5.63% interest in the
same project indirectly held by the Company through its investments
in Horizon Energy.
In
connection with the Acquisition of Interest, the Company also
executed the Limited Liability Company Agreement for Horizon, which
provides the Company with the right to appoint one Manager to
Horizon Acquisition’s three-member Board of Managers. The
Company appointed Mr. Cohen, the Company’s Executive
Chairman, to the Board of Managers. Mr. Cohen purchased 36.363
membership units in Horizon Acquisition in a separate transaction,
representing an approximate 3.6% membership interest.
LBE Partners, LLC
On October 2, 2018, the Company, ICO
Liquidating Trust, LLC (“ICO”),
and LBE Partners, LLC, a Delaware limited liability company
(“LBE”),
which owns various working interests in several oil and gas wells
located in the Hardin oil field in Liberty, Texas, entered into a
Membership Interest Purchase Agreement (the
“LBE Purchase
Agreement”),
effective September 24, 2018, pursuant to which the Company
purchased a 66.67% membership interest in LBE Partners from ICO in
exchange for 300,000 shares of the Company’s common stock.
Both ICO and LBE Partners are managed by Scot Cohen, the
Company’s Executive Chairman.
Related Party Loan
On June
18, 2018, Bandolier entered into a loan agreement with Scot Cohen
(the “Cohen Loan
Agreement”), pursuant to which Mr. Cohen loaned the
Company $300,000 at a 10% annual interest rate, due on September
30, 2018. The purpose of the Cohen Loan Agreement was to provide
the Company with short-term financing in connection with the
Company’s drilling program in Osage County, Oklahoma. On
December 17, 2018, the maturity date of the loan was extended from
September 30, 2018 to March 31, 2019. On January 31, 2019, the
Company and Mr. Cohen entered into a Debt Conversion Agreement,
pursuant to which Mr. Cohen agreed to convert all outstanding debt
and accrued interest owed under the Cohen Loan Agreement into
units, consisting of an aggregate of 15,000 shares of Series A
Preferred and warrants to purchase 750,000 shares of Company common
stock, sold and issued in the Series A Financing. As a result, the
Cohen Loan Agreement was terminated and deemed satisfied in full.
For more information regarding the debt conversion, see Note 1.
Upon conversion of the note, the Company recorded a total loss on
debt extinguishment totaling $94,388, consisting of $35,920 from
Mr. Cohen’s loan and $58,468 from Fortis Oil &
Gas.
Pearsonia West Investment Group.
On May 30, 2014, the Company entered into a
Subscription Agreement pursuant to which the Company was issued a
50% interest in Bandolier Energy, LLC (“Bandolier”) in exchange for a capital contribution of
$5.0 million (the “Bandolier
Acquisition”). Mr. Scot
Cohen, the Company’s Executive Chairman was a manager of, and
owned a 20% membership interest in, Pearsonia West Investment
Group, LLC (“Pearsonia
West”), a special purpose
vehicle formed for the purpose of investing in Bandolier with the
Company. On October 15, 2016, the Company indirectly
transferred its controlling interest in Pearsonia West as a result
of the transfer of the Company’s 50% membership interest in
Bandolier to MegaWest Energy Kansas
Corp. (“MegaWest”)
under the terms of the Contribution
Agreement, although the Company retained a 29.26% indirect interest
in Bandolier as a result of its interest in
MegaWest.
On January 31, 2018, the Company entered into an
Assignment and Assumption of Membership Interest with MegaWest
(the “Assignment
Agreement”), whereby the
Company transferred its interest in MegaWest in exchange for the
50% membership interest in Bandolier
(the “Bandolier
Interest”) then held by
MegaWest (the “Exchange
Transaction”), as a
result of the Bandolier Acquisition. The Exchange Transaction
followed the receipt by the Company of a notice of Redetermination,
as defined below, of MegaWest’s assets, including
MegaWest’s interest in the Bandolier Interests
(together, “MegaWest
Assets”), conducted
by Fortis Property Group, LLC, a Delaware limited liability
company (“Fortis”).
The Redetermination was conducted pursuant to the
Contribution Agreement, pursuant to which the Board of MegaWest was
entitled to engage a qualified appraiser to determine the value of
the MegaWest Assets and Bandolier Interests, and upon the
completion thereof (a “Redetermination”),
in the event the MegaWest Assets were determined to be less than
$40.0 million, then a Shortfall, as defined in the
Contribution Agreement, exists. As a result, the Company would
be required to make cash contributions to MegaWest in an amount
equal to the amount of the Shortfall
(the “Shortfall Capital
Contribution”). The
Contribution Agreement further provided that, in the event that the
Company was unable to deliver to MegaWest the Shortfall Capital
Contribution required after the Redetermination, if any, MegaWest
would have the right to exercise certain remedies, including a
right to foreclose on the Company’s entire interest in
MegaWest. In the event of foreclosure, the Bandolier Interest
would revert back to the Company.
In
lieu of engaging a qualified appraiser to quantify the Shortfall
Capital Contribution, and in lieu of requiring MegaWest to exercise
its remedies under the terms of the Contribution Agreement, the
Company and MegaWest entered into the Exchange Transaction. As
a result, the Company has no further rights or interest in
MegaWest, and MegaWest has no further rights or interest in any
assets associated with the Bandolier Interests. Pursuant to
the Contribution Agreement and Assignment Agreement, the Company
continues to be responsible for a reimbursement payment to MegaWest
in the amount of $259,313, together with interest accrued thereon
at an annual rate 10%, which will be due and payable one year after
the date of the Assignment.
June 2017 $2.0 Million Secured Note Financing
Scot
Cohen owns or controls 31.25% of Funding Corp., the former holder
of the senior secured promissory note in the principal amount of
$2.0 million (the “June 2017
Secured Note”) issued by the Company on June 13, 2017.
The June 2017 Secured Note accrued interest at a rate of 10% per
annum and was scheduled to mature on June 30, 2020.
On May
17, 2018, the parties executed an extension of the due date of the
first interest payment from June 1, 2018 to December 31, 2018.
As consideration for the interest payment extension, the Company
agreed to pay Funding Corp. an additional 10% of the interest due
June 1, 2018 on December 31, 2018. On December 17, 2018, the
parties executed a second extension of the due date of the first
interest payment from December 31, 2018 to March 31,
2019.
On
January 31, 2019, the Company and Funding Corp. entered into a
Secured Debt Conversion Agreement, pursuant to which Funding Corp.
agreed to convert the outstanding balance due under the June 2017
Secured Note, amounting to approximately $2.3 million, into 116,503
shares of Series A Preferred. As a result of the Secured Debt
Exchange, all indebtedness, liabilities and other obligations
arising under the June 2017 Secured Note were cancelled and deemed
satisfied in full.
In
connection with the issuance of the June 2017 Secured Note, the
Company issued to Funding Corp. warrants to purchase 840,336 shares
of the Company’s common stock (the “June 2017 Warrant”). On
January 31, 2019, as additional consideration for the
conversion of the amounts due under the June 2017 Secured Note, the
Company agreed to (i) reduce the exercise price of the June 2017
Warrant from $2.38 per share to $0.50 per share, and (ii) to extend
the expiration date of the June 2017 Warrant to January 31,
2024.
As
additional consideration for the purchase of the June 2017 Secured
Note, the Company issued to Funding Corp. an overriding royalty
interest equal to 2% in all production from the Company’s
interest in the Company’s concessions located in Osage
County, Oklahoma, originally held by Spyglass, valued at
$250,000.
As a
result of the Secured Debt Exchange, the June 2017 Secured Note was
terminated as of January 31, 2019.
November 2017 $2.5 Million Secured Note Financing
Scot
Cohen owns or controls 41.20% of Funding Corp. II, the former
holder of the senior secured promissory note in the principal
amount of $2.5 million (the “November 2017 Secured Note”)
issued by the Company on November 6, 2017. The November 2017
Secured Note accrued interest at a rate of 10% per annum and was
scheduled to mature on June 30, 2020.
On May
17, 2018, the parties executed an extension of the due date of the
first interest payment from June 1, 2018 to December 31, 2018.
As consideration for the interest payment extension, the Company
agreed to pay Funding Corp. II an additional 10% of the interest
due on June 1, 2018 on December 31, 2018. On December 17,
2018, the parties executed a second extension of the due date of
the first interest payment from December 31, 2018 to March 31,
2019.
On
January 31, 2019, the Company and Funding Corp. II entered into a
Secured Debt Conversion Agreement, pursuant to which Funding Corp.
II agreed to convert the outstanding balance due under the November
2017 Secured Note, amounting to approximately $2.8 million, into
140,799 shares of Series A Preferred stock. As a result of the
Secured Debt Exchange, all indebtedness, liabilities and other
obligations arising under the November 2017 Secured Note were
cancelled and deemed satisfied in full.
In
connection with the issuance of the November 2017 Secured Note, the
Company issued to Funding Corp. II warrants to purchase 1.25
million shares of the Company’s common stock (the
“November 2017
Warrant”). In relation to the financing, Scot Cohen
paid $250,000 for an overriding royalty interest from Funding Corp.
(as discussed below). On January 31, 2019, as additional
consideration for the conversion of the amounts due under the
November 2017 Secured Note, the Company agreed to (i) reduce the
exercise price of the November 2017 Warrant from $2.00 per share to
$0.50 per share, and (ii) extend the expiration date of the
November 2017 Warrant to January 31, 2024.
As
additional consideration for the purchase of the November 2017
Secured Note, the Company issued to Funding Corp. II an overriding
royalty interest equal to 2% in all production from the
Company’s interest in the Company’s concessions located
in Osage County, Oklahoma, originally held by Spyglass (the
“Existing Osage County Override”) then
transferred to Funding Corp. as inducement for the June 2017
Secured Note. The Existing Osage County Override was then acquired
by the Company from Mr. Cohen. In connection with the January 2019
debt restructuring, Funding II assigned the 2% overriding interest
to the Company.
As a
result of the Secured Debt Exchange, the November 2017 Secured Note
was terminated as of January 31, 2019.
Policy and Procedures Governing Related Party
Transactions
The
Board of Directors is committed to upholding the highest legal and
ethical conduct in fulfilling its responsibilities and recognizes
that related party transactions can present a heightened risk of
potential or actual conflicts of interest.
The
SEC rules define a related party transaction to include any
transaction, arrangement or relationship which: (i) we are a
participant; (ii) the amount involved exceeds $120,000; and (iii)
executive officer, director or director nominee, or any person who
is known to be the beneficial owner of more than 5% of our common
stock, or any person who is an immediate family member of an
executive officer, director or director nominee or beneficial owner
of more than 5% of our common stock had or will have a direct or
indirect material interest.
Although
we do not maintain a formal written procedure for the review and
approval of transactions with such related persons, it is our
policy for the disinterested members of our Board of Directors to
review all related party transactions on a case-by-case
basis. To receive approval, a related-party transaction must
have a legitimate business purpose for us and be on terms that are
fair and reasonable to us and our stockholders and as favorable to
us and our stockholders as would be available from non-related
entities in comparable transactions.
All
related party transactions must be disclosed in our applicable
filings with the SEC as required under SEC rules.
ITEM 14. ACCOUNTING FEES AND
SERVICES
Principal Accountant Fees and Services
Effective July 1, 2018
GBH CPAs, PC (“GBH”)
was acquired by Marcum LLP (“Marcum”)
(the “Merger”);
however, GBH remained active for a short period of time subsequent
to the Merger to wrap up business operations. As a result of the
Merger, subsequent to the filing of the Company’s Annual
Report on Form 10-K for the year ended April 30, 2018, GBH resigned
as the Company’s independent registered public accounting
firm on August
21, 2018 (the
“Effective
Date”). On August 21,
2018, the Company engaged Marcum as its new independent registered
public accounting firm. Accordingly, all
payments for principal accountant fees and services during the
fiscal year ended April 30, 2019 were furnished to Marcum, and all
payments for principal accountant fees and services during the
fiscal year ended April 30, 2018 were furnished to
GBH.
The following table presents approximate aggregate fees and other
expenses for professional services rendered by Marcum and GBH for
the audit of the Company’s annual financial statements for
the years ended April 30, 2019 and 2018, as well as expenses for
other services rendered during those periods.
|
|
|
|
|
|
|
|
|
Audit Fees
|
$100,500
|
$77,000
|
|
Audit-Related Fees
|
$-
|
$-
|
|
Tax Fees
|
$-
|
$-
|
|
All Other Fees
|
$-
|
$-
|
|
Total
|
$100,500
|
$77,000
|
(1)
All payments for principal accountant fees and services during the
fiscal year ended April 30, 2019 were furnished to Marcum
LLP.
(2)
All payments for principal accountant fees and services during the
fiscal year ended April 30, 2018 were furnished to GBH CPAs,
PC.
Audit Fees:
Audit
fees include fees billed for the annual audit of the
Company’s financial statements and quarterly reviews for the
fiscal years ended April 30, 2019 and 2018, and for services
normally provided by Marcum and GBH in connection with routine
statutory and regulatory filings or engagements.
Audit-Related Fees:
Audit-related fees includes fees billed for
assurance and related services that are reasonably related to the
performance of the annual audit or reviews of the Company’s
financial statements and are not reported under
“Audit Fees.” During the fiscal years ended April
30, 2019 and 2018, no audit-related fees were paid to Marcum or GBH
by the Company.
Tax Fees:
Tax
fees include fees for professional services for tax compliance, tax
advice and tax planning. During the fiscal years ended April 30,
2019 and 2018, no tax fees were paid to Marcum or GBH by the
Company.
All Other Fees:
All
other fees include fees for products and services other than those
described above. During the fiscal years ended April 30, 2019
and 2018, no such fees were paid to Marcum or GBH by the
Company.
The
Audit Committee has reviewed the above fees for non-audit services
and believes such fees are compatible with the independent
registered public accountants’
independence.