Disposition of Bow Energy Ltd., A Related Party
|12 Months Ended|
Dec. 31, 2019
|Disposal Group, Not Discontinued Operation, Disposal Disclosures [Abstract]|
|Disposition of Bow Energy Ltd., A Related Party||
NOTE 5. DISPOSITION OF BOW ENERGY LTD., A RELATED PARTY
Effective August 31, 2018, the Company entered into and closed the transactions contemplated by a Share Exchange Agreement with Blue Sky Resources Ltd. (“Blue Sky” and the “Exchange Agreement”). The President, Chief Executive Officer and 100% owner of Blue Sky is Ilyas Chaudhary, the father of Zel C. Khan, the Company’s Chief Executive Officer. As described above in Note 4, Mr. Chaudhary indirectly owns and controls BSIH, which controlled Bow prior to the acquisition of Bow as described in Note 4.
Pursuant to the Exchange Agreement, the Company exchanged 100% of the ownership of Bow, in consideration for:
The Exchange Agreement closed on August 31, 2018 and has an effective date of July 1, 2018. The Exchange Agreement contains customary and standard representations and warranties of the parties, indemnification obligations (which survived for six months following the closing) and closing conditions. The Company canceled the Blue Sky Shares following the closing and returned such shares to the status of authorized but unissued shares of common stock.
The total consideration received for the sale of Bow is summarized as follows:
(1) Initially recognized at $0 as the entity is in a net liability position.
The fair value of the 70,807,417 common shares returned as part of the consideration paid for Bow was determined on the closing price of the stock on August 31, 2018, which was $0.07 per share, for a fair value of $4,956,519.
The retained non-controlling 20% interest in BEIH was initially recognized at fair value with a minimum value of $0 and is accounted for using the equity method. During the year ended December 31, 2018, the Company’s share of loss on its investment in BEIH was $11,247 which was not recorded against the carrying value as the investment is in a net liability position. The carrying value of the investment at December 31, 2018 is $0.
The total loss on acquisition and disposition of Bow is summarized as follows: