Quarterly report pursuant to Section 13 or 15(d)

Preferred Stock

v2.4.0.8
Preferred Stock
6 Months Ended
Jun. 30, 2014
Preferred Stock [Abstract]  
PREFERRED STOCK
5.     PREFERRED STOCK
 
All of the preferred stock of the Company is convertible into common shares. The Series A and Series C stock conversion ratio is 100 to 1 shares. The Series B, B-1, D and E stock conversion ratio is 1 to 1 shares. The conversion price of Series B stock may be adjusted if a ‘dilutive triggering event’ occurs which could happen if the Company were to sell or issue common stock, warrants or convertible securities without consideration or for a consideration per share less than the conversion price in effect immediately prior to such sale or issue (dilutive triggering price). In such case, the Series B conversion price would be reduced to a price equal to the dilutive triggering price. All preferred stock has voting rights equal to the number of shares it would have on an ‘as if converted’ basis. All preferred stock is entitled to dividends rights equal to the number of shares it would have on an ‘as if converted’ basis. None of the preferred stock is redeemable, participating nor callable.
 
The Company analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity.
 
The Company analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible Securities with Beneficial Conversion Features ” and noted none.
 
Between June 4 and June 30, 2014, seven investors in Series A preferred stock converted a total of 38,100 shares of Series A for 3,810,000 shares of restricted common stock in accordance with their conversion rights which includes a blocker with respect to individual ownership percentages.
 
The Series B-1 preferred stock contains a liquidation provision whereas in the event of a fundamental transaction (such as the merger which occurred on June 3, 2014), the shareholder has the option to receive a preferential amount of cash equal to 400% of the stated value per share. On June 6, 2014, the sole holder of Series B-1 stock liquidated 87,500 shares for $350,000 leaving a remaining balance of 68,731 shares of Series B-1 preferred outstanding.