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Shareholders' Equity
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Feb. 29, 2012
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May 31, 2011
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| Stockholders' Equity Note Disclosure [Text Block] |
11. SHAREHOLDERS’
EQUITY
Preferred
Stock Issuances
During
the quarter ended August 31, 2011, several private
investors made an equity investment of $430,250 for
which these investors received 430,250 shares of the
Company’s redeemable convertible preferred
stock. The proceeds were used for operating
capital.
During
the quarter ended August 31, 2011, a secured lender
agreed to accept payment of the outstanding interest
owed on its note through May 25,
2011, totaling approximately $277,544 into
277,544 shares of the Company’s preferred
stock.
In
August 2011, the Company issued 50,000 shares of
preferred stock to a lender in connection with a loan
to the Company of $200,000. The company
recorded total debt discount of $50,000 and interest
expense of $2,778 in connection with these
shares.
During
the quarter ended November 30, 2011, one private
investor made an investment of $370,000 for which he
received 370,000 shares of the Company’s
redeemable convertible preferred stock. The proceeds
were used for operating capital.
During
the quarter ended November 30, 2011, two preferred
shareholders converted a total of 263,300 shares of
preferred stock at the conversion rate of $.30 per
share for which they received a total of 877,666
shares of common stock.
During
the quarter ended February 29, 2012, a preferred
shareholder converted a total of 756,000 shares of
preferred stock at the conversion rate of $.30 per
share for which they received a total of 2,520,000
shares of common stock.
Common
Stock Issuances
In
September 2011, two preferred shareholders converted
a total of 263,300 shares of preferred stock at the
conversion rate of $.30 per share for which they
received a total of 877,666 shares of common
stock.
In
October, 2011, the Company issued a total of 155,000
shares of common stock to three employees. The
company has record an expense of $75,950 in
connection with these shares over a one year
amortization period.
During
the quarter ended February 29, 2012, a preferred
shareholder converted a total of 756,000 shares of
preferred stock at the conversion rate of $.30 per
share for which they received a total of 2,520,000
shares of common stock.
Stock
Option Issuances
On
or about February 11, 2011, the Company entered a
marketing and distribution agreement with KeHE
Distributors pursuant to which the Company is
obligated to issue stock options subject to KeHE
achieving the purchase thresholds as set forth
below:
The
total number of shares represents 9.99% of the
Company’s common stock outstanding on a
fully-diluted basis. The respective stock options
which will have an exercise period of three years
from the date of issuance at an exercise price of
$.30 per share. During May 2011, the
Company amended the vesting terms of these options,
whereby 440,000 of such options were vested and the
remainder of the options vested as of August 31,
2011.
In
September 2011, the Company agreed to issue a total
of 550,000 stock options to board members, subject to
shareholder ratification, to replace those options
which expired earlier in the year. The
stock options have an exercise period of three years
from the date of issuance and an exercise price of
$.30 per share. The issuance of the
options was ratified at the annual shareholder
meeting in January 2012. The Company has recorded an
expense of $20,420 in connection with these
options. |
14.
SHAREHOLDERS’
EQUITY
Terms
of Series A Preferred Stock (“Preferred
Stock”)
The
Preferred Stock is convertible at $.30 per share into
$.001 par value Common Stock of Company, (equaling 60% of
the issued and outstanding Common Stock of the Company on
a fully diluted basis, excluding the Management Stock
Option (see below)). Initially, dividends were
to be paid (a) at an annual rate of 12% in each of the
first three years ending August 14, 2008, 2009, and 2010
and were to be paid in preferred shares and (b) after the
first three years, at a rate of 12% if paid in cash or at
a rate of 15% if paid in preferred shares, at the
election of the Company. In February 2010, the
preferred shareholders voted to terminate the issuance of
dividends effective November 30, 2009. The
preferred share dividends shall convert into Common Stock
at $.30 per share.
The
redemption provisions of these redeemable preferred
shares are at the option of the Company. At any time
prior to August 14, 2010, and upon 30 days advance
notice, the Company had the right to redeem one-half of
the Preferred Stock that is issued and outstanding by
paying the Holder the full par value of the Preferred
Stock plus accrued dividends in cash (the “First
Redemption”). The remaining one-half of
the Preferred Stock that is issued and outstanding after
the First Redemption can either be: (a) redeemed by the
Company in cash at par value plus accrued dividends with
the Holder also receiving a 2-year option to acquire 5%
of the issued and outstanding Common Stock of the Company
at an exercise price of $.30 per share, or, (b) converted
into 30% of the issued and outstanding Common Stock of
the Company (the “Second
Redemption”). The Holder shall have sole
authority to elect subsection (a) or (b) above upon
receiving a Redemption Notice. Any Common
Stock or Common Stock Option issued pursuant to the First
Redemption or the Second Redemption shall be on a
fully-diluted basis.
So
long as over $1,500,000 of the Preferred Stock is issued
and outstanding the Company shall require the prior
written consent of Holders representing 2/3 of the
Preferred Stock issued and outstanding to (a) sell, merge
with, acquire or consolidate with another business
entity, (b) incur additional leverage beyond the leverage
contemplated by the Company and Holders as part of the
Company’s acquisition of Artisanal Cheese, LLC, or
(c) issue any new shares of common stock or securities
convertible or exercisable into Common Stock in excess of
2% of the shares of Common Stock issued and outstanding
on a fully diluted basis at the Closing, excluding the
Management Stock Option below.
In
the event of a liquidation, the Preferred Stockholders
shall receive a cash payment of $1.20 per preferred
share.
Preferred
Stock Issuances
The
Company has sold 5,350,000 shares of redeemable
convertible Preferred Stock at a price of $1.00 per share
for total gross proceeds of $5,350,000. In
February 2010, as a condition of the Long Term Loan
financing, the Company repurchased 500,000 shares of
preferred stock as part of its $2.5 million loan
agreement with the Lender (See Note 13, Long Term
Debt). The Company paid a total of $500,000
for the repurchased shares.
The
Company issued 15,000 shares of preferred stock in
exchange for consulting services during fiscal year ended
May 31, 2007 and another 151,400 shares of preferred
stock was issued to certain shareholders in consideration
of their participation in the Bridge and Term Loans which
they collectively made to the Company during the fiscal
year ended May 31, 2010. The Company recorded
an expense of $151,400 in connection with these
shares.
The
number of preferred shares issued as dividends from their
initial sale in August 2007 through November 30, 2009
(the date upon which the dividends were deemed
terminated) is 1,402,760. In March 2011, a
preferred shareholder converted 13,500 shares of
preferred stock at the conversion price of $.30 per share
into 45,000 shares of common stock. As
of May 31, 2011, the total number of preferred shares
outstanding is 6,405,660.
Common
Stock Issuances
In
June 2009, the Company issued 125,000 shares of common
stock to one of its employees vesting over two
years. The company recorded deferred
compensation of $36,250 in connection with these
shares.
In
December 2009, the Company issued 110,000 shares of
common stock to each of two directors for their agreement
to serve as board members. The company
recorded an expense of $24,200 in connection with these
shares.
In
December 2009, the Company issued 50,000 shares of common
stock to one of its employees vesting over two
years. The company recorded deferred
compensation of $5,500 in connection with these
shares.
In
December 2009 and February 2010, the Company issued
60,000 and 25,000 shares of common stock, respectively,
to two consultants for services rendered. The
company recorded an expense of $6,975 in connection with
these shares.
In
February 2010, the Company canceled 200,000 shares of
common stock which had been issued to employees whose
employment terminated prior to the completion of vesting.
The company therefore has reversed all deferred
compensation expenses of ($91,053) in connection with
these shares.
In
February 2010, the Company issued 9,275,000 shares of
common stock to a lender in connection with a loan to the
company totaling $2.5 million. The company
recorded total debt discount of $463,750 and interest
expense of $38,646 in connection with these
shares.
In
February 2010, the Company issued 6,375,000 shares of
common stock to its chairman and chief executive officer
and cancelled its existing stock option agreement with
the officer in connection with an amended and restated
employment agreement which provides, in pertinent part,
for a term extension of three years. The stock
shall be fully vested but the officer shall be restricted
from selling, transferring or otherwise disposing of more
than 2,125,000 shares of said stock in each successive
twelve month period commencing February 22,
2010. The Company recorded deferred
compensation of $318,750 and an expense of $26,563 in
connection with these shares.
In
July 2010, the Company issued 50,000 shares of common
stock to each of seven directors for a total of 350,000
shares for their agreement to serve as board
members. The company recorded an expense of
$24,200 in connection with these shares over a one year
amortization period.
In
October, 2010, the Company issued a total of 65,000
shares of common stock to two employees. The company has
record an expense of $38,786 in connection with these
shares over a one year amortization period.
In
December 2010, 25,000 shares of common stock previously
issued to an employee were cancelled.
In
March 2011, a preferred shareholder converted 13,500
shares of preferred stock at the conversion rate of $.30
per share for which the shareholder received 45,000
shares of common stock.
Stock
Option
At
the time the Company acquired Artisanal Cheese LLC
(during fiscal year ended May 31, 2008), the Company
offered Mr. Daniel W. Dowe and Mr. William Feeney of
5,100,000 of management stock options so as to encourage
them to serve as Chairman/CEO and President of the
Company, respectively. Specifically,
the Company offered them five-year management
stock options having an exercise price of $.30 per share
that are exercisable into approximately 12% and 8%,
respectively, of the Company’s common stock on a
fully-diluted basis. The options were not
exercisable unless the Company (a) achieved $21.6 million
in revenue or $2 million EBITDA in a full calendar year
by no later than 2009 and (b) redeemed 2,125,000 shares
of the preferred stock. When Mr. Feeney
resigned as President in January 2009, and Mr. Dowe
assumed Mr. Feeney’s duties, the board voted at its
meeting on January 31, 2009 to adjust the aforementioned
percentages to 14.4% and 1.9%, respectively, recognizing
Mr. Feeney’s contribution toward the acquisition of
Artisanal Cheese LLC and his continued contribution as a
consultant to the Company. The board
subsequently extended the date to achieve projected
revenue to December 31, 2010. In February
2010, Mr. Dowe's and Mr. Feeney's stock options were
canceled.
At
its board meeting on April 9, 2008, the board authorized
three-year stock options to each of the seven
non-managing board members totaling 770,000 stock
options. The options had an exercise price of
$.30 per share that is exercisable into 0.4% of the
Company’s Common Stock. These options expired on
January 31, 2011.
On
or about February 11, 2011, the Company entered a
marketing and distribution agreement with KeHE
Distributors pursuant to which the Company is obligated
to issue stock options subject to KeHE achieving the
purchase thresholds as set forth below:
The
total number of shares represents 9.99% of the
Company’s common stock outstanding on a
fully-diluted basis. The respective stock options which
will have an exercise period of three years from the date
of issuance at an exercise price of $.30 per
share. During May 2011, the Company amended
the vesting terms of these options, whereby 440,000 of
such options were vested and the remainder of such
options issued vested post year end. The Company is
currently re-negotiating the vesting terms of the
4,440,000 options vesting post year end.
A
summary of the activity of stock options for the years
ended May 31, 2011 and 2010 is as follows:
The
intrinsic value of the Company’s options
outstanding during the years ended May 31, 2011 and 2010
was $0 and $0, respectively.
Information,
at date of issuance, regarding stock option grants for
the year ended May 31, 2011:
The
following table summarizes information about stock
options outstanding and exercisable at May 31,
2011:
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