|3 Months Ended
Mar. 31, 2016
|Stockholders' Equity Note [Abstract]
|Stockholders' Equity Note Disclosure [Text Block]
On February 23, 2016, the Company issued 53,312 shares of its Preferred Series F stock with a grant date value of $35,186 to one of its investors as an incentive.
Dividend charges recorded during the three months ended March 31, 2016 and 2015 are as follows:
Accrued dividends payable at March 31, 2016 and December 31, 2015 are comprised of the following:
There were no warrants issued during the three months ended March 31, 2016.
A summary of the warrant activity during the three months ended March 31, 2016 is presented below:
In conjunction with the Lateral senior credit agreement dated October 28, 2015, the Company also entered into a Redemption Rights Agreement (“agreement”). Contained in this agreement is a put provision related to the preferred shares of stock issued as a condition of the transaction. The Redemption Rights may be exercised at any time on or after October 28, 2017, provided the following conditions are met:
(i) The Company’s market capitalization on such date is equal to or greater than $25,000,000, or (ii) the last twelve months earnings before interest, taxes depreciation, and amortization ending on the last day of the month preceding such date is greater than $3,000,000.
Further, the Redemption Rights are barred from being exercised if the exercise of such Redemption Rights would, in good faith, prevent the Company from continuing as a going concern.
The Redeemable Shares are redeemable at the per share price implied by 10 multiplied by the Company’s LTM EBITDA, multiplied by the Ownership Percentage, divided by the number of Redeemable shares then held.
An analysis was performed, under ASC 480-10-25-7 to determine if the redeemable shares should be classified as debt or equity. The results of this analysis determined the redeemable shares did not fall under the definition of mandatorily redeemable financial instruments and therefore should not be classified as debt.
Pursuant to ASC 480-10-S99, preferred stock redeemable for cash or other assets are to be classified outside of permanent equity if it is redeemable with any one of the following characteristics:
The Redeemable Shares are redeemable upon the occurrence of certain events that are not solely within the control of the reporting entity. In the natural course of pursuing the fulfillment of its required fiduciary duties, the Company may meet the conditions upon which the shares would become redeemable (i.e. market capitalization and/or EBITDA, along with going concern status), and would be thus unable to control the events leading to redemption. As a result of the evaluation, the Company has concluded that the Redeemable Shares are appropriately classified outside of permanent equity as temporary equity.
On December 23, 2015, the Board unanimously authorized and approved an amendment to our Articles of Incorporation to effect a reverse stock split of our Common Stock at a 1-for-20 ratio (the “Reverse Split”) and increase our common shares authorized to 200,000,000. On December 30, 2015, stockholders holding a majority of our voting power approved by written consent the amendment to our Articles of Incorporation, which would affect the Reverse Split. The Reverse Split will reduce the number of outstanding shares of our Common Stock by reclassifying and converting all outstanding shares of our Common Stock into a proportionately fewer number of shares of Common Stock. The reverse stock split is pending approval by the Financial Industry Regulatory Authority (“FINRA”).