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EX-32.2 - EXHIBIT 32.2 - ARROW RESOURCES DEVELOPMENT INCv309225_ex32-2.htm
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v2.4.0.6
RELATED PARTY TRANSACTIONS
12 Months Ended
Dec. 31, 2011
Related Party Transactions [Abstract]  
Related Party Transactions Disclosure [Text Block]

NOTE 7 - RELATED PARTY TRANSACTIONS

 

[1] Management Agreement with Empire Advisory, LLC

 

Effective August 1, 2005, the Company entered into a Management Agreement with Empire Advisory, LLC (“Empire”) under which Empire provides chief executive officer and administrative services to the Company in exchange for a) an annual fee of $300,000 for overhead expenses, b) $1,000,000 per annum (subject to increases in subsequent years) for executive services, and c) a one-time fee of $150,000 for execution of the proposed transaction which was incurred in 2005.  The term of the agreement was for five years. On May 18th, 2011 the agreement was extended through December 31st, 2016, and will follow the terms of the original agreement, and is automatically renewable thereafter unless notice by both parties are sent within 120 days prior to the end of said agreement.

 

As of December 31, 2011 and December 31, 2010, the Company had short-term borrowings of $11,632,478 and $8,517,313, respectively, due to Empire, consisting of cash advances to the Company and working capital raised by Empire, as agent, on behalf of the Company.  These amounts are non-interest bearing and due on demand.

 

Peter Frugone is a member of the Board of Directors of the Company and is the owner of Empire. Empire, as agent, was the holder of the $125 million senior secured note payable settled in December 2005.

 

Management consulting fees and services incurred by Empire charged to the Statement of Operations for the years ended December 31, 2011 and 2010 were $3,807,678 and $3,125,815, respectively.

 

During the year ended December 31, 2011, the Company also incurred Director’s compensation expense of $55,000 to Mr. Frugone, consisting of cash compensation of $50,000 and stock based compensation of $5,000 based upon the Company’s share trading price on the date of the grant. During the year ended December 31, 2010, the Company also incurred Director’s compensation expense of $67,500 to Mr. Frugone, consisting of cash compensation of $50,000 and stock based compensation of $17,500 based upon the Company’s share trading price on the date of the grant.  During the year ended December 31, 2009, the Company also incurred Director’s compensation expense of $58,750 to Mr. Frugone, consisting of cash compensation of $50,000 and stock based compensation of $8,750 based upon the Company’s share trading price on the date of the grant.  At December 31, 2011 the Company is obligated to issue 1,250,000 company shares to him, and “Accounts payable and accrued liabilities” includes $250,000 due to him for the cash based portion of his 2011, 2010, 2009, 2008 and 2007 director’s compensation (See Note 7[4]).

 

During the years ended December 31, 2011 and 2010, the Company made cash payments of $696,862 and $276,043, respectively, to Empire under the agreement.

 

[2] Engagement and Consulting Agreements entered into with individuals affiliated with Arrow PNG:

 

Consulting fees and services charged in the Statement of Operations for the year ended December 31, 2011 and December 31, 2010 incurred to Hans Karundeng and Rudolph Karundeng under Engagement and Consulting Agreements totaled $1,500,000 and $1,500,000, respectively. In addition, as of December 31, 2009 and 2008 the Company owed them a total of $9,189,291 and $7,659,291, respectively. These agreements are discussed in detail in Note 11.

 

During the year ended December 31, 2011, the Company also incurred Director’s compensation expense of $55,000 to Rudolph Karundeng, consisting of cash compensation of $50,000 and stock based compensation of $5,000 based upon the Company’s share trading price on the date of the grant. During the year ended December 31, 2010, the Company also incurred Director’s compensation expense $67,500 to Rudolph Karundeng, consisting of cash compensation of $50,000 and stock based compensation of $17,500 based upon the Company’s share trading price on the date of the grant. During the year ended December 31, 2009, the Company also incurred Director’s compensation expense $58,750 to Rudolph Karundeng, consisting of cash compensation of $50,000 and stock based compensation of $8,750 based upon the Company’s share trading price on the date of the grant. At December 31, 2011 the Company is obligated to issue 1,250,000 Common Stock shares to him, and “Accounts payable and accrued liabilities” includes $250,000 due to him for the cash based portion of his 2011, 2010, 2009, 2008 and 2007 director’s compensation (See Note 7[4]).

 

On May 18th, 2011 the engagement and consulting agreements with Hans Karundeng and Rudolph Karundeng (See Note 10) were extended through December 31st, 2016, and will follow the terms of the original agreements, and is automatically renewable thereafter unless notice by both parties are sent within 120 days prior to the end of said agreements.

   

[3] Non-Interest Bearing Advance Received from Company Director:

 

In July 2006, the Company received a $150,000 non-interest bearing advance from John E. McConnaughy, Jr., a Director of the Company, which is due on demand. This note was repaid in October 2006.  Also, in October 2006, the Company received an additional $200,000 non-interest bearing advance from Mr. McConnaughy, Jr. which was also due on demand.  Of this amount, $25,000 was repaid in March 2007 and $88,000 in April and May 2008, leaving a balance due of $87,000 on this note.  In February and March 2007, the Company received an additional $200,000 non-interest bearing advance from John E. McConnaughy, Jr., which is due on demand. In May and June 2007, the Company received an additional $250,000 non-interest bearing advance from John E. McConnaughy, Jr., which is due on demand. In July 2007, the Company received $250,000 of additional non-interest bearing advances from John E. McConnaughy, Jr., which is due on demand. In August 2007, the Company received a $50,000 non-interest bearing advance from John E. McConnaughy, Jr., which is due on demand. In October 2007 the Company received a $200,000 non-interest bearing advance from John E. McConnaughy, Jr., which is due on demand. In December 2007 the Company received a $250,000 non-interest bearing advance from John E. McConnaughy, Jr., which is due on demand. In March 2008, the Company received an additional $110,000 non-interest bearing advance from John E. McConnaughy, Jr. In May and June 2008, the Company received $75,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due on demand. In July 2008, the Company received $90,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due on demand.

 

In August 2008, the Company received $240,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due on demand. In September 2008, the Company received $90,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due on demand. In October 2008, the Company received $50,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due on demand. In November 2008, the Company received $10,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due on demand. In December 2008, the Company received $5,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due on demand. On January 15, 2009, the Company received a $5,000 non-interest bearing advance from John E. McConnaughy Jr. In repayment, the Company will repay the full amount of the note in cash over two years from the date the note is executed. On January 27, 2009, the Company repaid $5,000 to John E. McConnaughy, Jr against the outstanding balance owed to him.  On September 28, 2009, John E. McConnaughy, Jr. converted $9,000 of non-interest bearing advance owed to him by the Company into 180,000 shares of restricted, unregistered common stock at $0.05 per share into the name of Roberta Konrad. On September 28, 2009, John E. McConnaughy, Jr. converted $30,000 of non-interest bearing advance owed to him by the Company into 600,000 shares of restricted, unregistered common stock at $0.05 per share into the name of Jacqueline Rowen.  As of December 31, 2009, John E. McConnaughy III assigned a $12,000 advance to John McConnaughy, Jr.  As of December 31, 2011 and December 31, 2010, the Company had $1,955,000 and $1,955,000, respectively, left to be repaid to Mr. McConnaughy, which is included in “Due to Related Parties.”

 

On June 2, 2009, the Company received a $25,000 10% interest bearing advance from John E. McConnaughy Jr. In repayment, the Company will repay the full amount of the note and accrued interest in cash by September 1, 2009. As of December 31, 2010, the outstanding principal and accrued interest of $2,500 has been included in “Notes Payable”. On November 5, 2009, the Company entered into a thirty day loan extension agreement with John E. McConnaughy Jr. for this $25,000 loan. The principal amount and interest was payable on December 5, 2009. This note is currently in default.

 

During the year ended December 31, 2011, the Company also incurred Director’s compensation expense $55,000 to Mr. McConnaughy, consisting of cash compensation of $50,000 and stock based compensation of $5,000 based upon the Company’s share trading price on the date of the grant.  During the year ended December 31, 2010, the Company also incurred Director’s compensation expense $67,500 to Mr. McConnaughy, consisting of cash compensation of $50,000 and stock based compensation of $17,500 based upon the Company’s share trading price on the date of the grant.  During the year ended December 31, 2009, the Company also incurred Director’s compensation expense $58,750 to Mr. McConnaughy, consisting of cash compensation of $50,000 and stock based compensation of $8,750 based upon the Company’s share trading price on the date of the grant.  At December 31, 2011 the Company is obligated to issue 1,250,000 Common Stock shares to him, and “Accounts payable and accrued liabilities” includes $250,000 due to him for the cash based portion of his 2011, 2010, 2009, 2008 and 2007 director’s compensation (See Note 7[4]).

 

[4] Directors’ Compensation:

 

On December 3, 2007, the Board of Directors approved a plan to compensate all members of the Board of Directors at a rate of $50,000 per year and 250,000 shares of Company common stock effective January 1, 2007. This compensation plan applies to any board member that belonged to the Board as of and subsequent to January 1, 2007. Those board members that were only on the Board for part of the year will received pro-rata compensation based on length of service. As of December 31, 2011 and December 31, 2010, none of the shares under this plan have been issued and the Company has an accrued liability of $900,137 and $750,137, respectively, of cash-based compensation and recorded additional paid-in capital through those dates of $240,025 and $225,033, respectively, for stock-based compensation based on the fair value of 4,500,685 and 3,750,685 shares to be issued to the members of the Board, respectively.