Quarterly report pursuant to Section 13 or 15(d)

EQUITY TRANSACTIONS

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EQUITY TRANSACTIONS
6 Months Ended
May 31, 2016
Equity [Abstract]  
EQUITY TRANSACTIONS
12. EQUITY TRANSACTIONS
 

Preferred Stock

 

The Company is authorized to issue 10,000,000 shares of Preferred Stock with a par value of $0.001 per share. On July 31, 2014, the Board of Directors designated 50,000 shares of its Preferred Stock as “Class A Convertible Preferred Stock” (the “Class A Preferred Stock”). Each share of Class A Preferred Stock has a stated value of $5.00 per share. The holders of Class A Preferred Stock have no voting rights. The holders are entitled to receive cumulative dividends at a rate of 10% of the stated value per annum, payable twice a year, subject to the availability of funds and approval by the Board of Directors. In the discretion of the Board of Directors, dividends may be paid with common stock. In the event of a liquidation or dissolution of the Company each holder of Class A Preferred Stock shall be entitled to be paid in cash $5 per share.

 

At any time after August 31, 2015, a holder of Class A Preferred Stock may, at its option, convert all or a portion of its outstanding shares into common stock.

 

Common Stock

 

2016 Transactions

 

On December 10, 2015, the Company entered into a subscription agreement with a third party, whereby it sold 25,000 shares of its common stock at a price of $0.20 per share for total cash proceeds of $5,000.

 

On January 26, 2016, the Company issued 50,000 fully vested and non-forfeitable shares of common stock to a third-party service provider of consulting services. The aggregate fair value of the shares amounted to $20,000 based on the closing price of the Company’s common stock on the issuance date. The related services were completed during the six months ended May 31, 2016.

 

Conversion of debt

 

2016 Transactions

 

On January 26, 2016, the Company issued 297,619 shares of common stock to Typenex Co-Investment, LLC in conversion of $12,500 of accrued interest. The shares of common stock were valued at $119,048 resulting in a loss on conversion of $106,548.

 

On January 28, 2016, the Company issued 100,000 shares of common stock to Black Mountain Equities, Inc. in conversion of $12,830 of principal and accrued interest. The shares of common stock were valued at $40,000 resulting in a loss on conversion of $27,170.

 

On January 29, 2016, the Company issued 60,000 shares of common stock to JMJ Investments, Inc in conversion of $3,024 of accrued interest. The shares of common stock were valued at $24,000 resulting in a loss on conversion of $20,976. 

 

Common Stock Warrants

 

On December 2, 2015, in connection with issuing the Livingston Note (see Note 8d), the Company issued 100,000 common stock warrants which were valued at $30,987.

 

In January 2016, in connection with an amendment to the LG Capital Funding, LLC Note (see Note 7f), the Company issued 75,000 common stock warrants, which were valued at $26,250. 

 

Stock based compensation

 

During the three and six months ended May 31, 2016, the Company issued nil and 50,000 shares, respectively, of common stock to service providers. During the three and six months ended May 31, 2015, the Company issued 100,000 and 312,500 shares, respectively, of common stock to service providers. The shares of common stock are being expensed over the term of the services being provided. As a result of these issuances, the Company has recorded stock-based compensation during the three and six months ended May 31, 2016 of nil and $20,000, respectively. The Company recorded stock-based compensation during the three and six months ended May 31, 2015 of $100,000 and $251,833, respectively. The fair value of the shares was determined based on the closing price of the Company’s common stock on the issuance date and is being recognized over the term of the respective consulting agreement.