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Convertible Debentures and Preferred Stock
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6 Months Ended | ||||||||
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Jun. 30, 2011
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| Convertible Debentures and Preferred Stock |
Note 6. Convertible Debentures and Preferred Stock
In
connection with the purchase of Wood Energy, the Company issued
$1,525,000 of convertible debentures bearing interest at 10% per
annum and payable in five years. The debentures were convertible
into the Company’s common stock at $2.00 per share. In
accordance with ASC 470-20 (Debt with Conversion and Other
Options), the Company determined that the convertible debentures
had beneficial conversion features because the embedded conversion
feature was an “in-the-money” issuance. Therefore the
embedded beneficial conversion feature was valued separately at
issuance. The convertible debentures met the definition of
“conventional convertible debt” because the number of
shares which may be issued upon the conversion of the debt is
fixed. Therefore, the beneficial conversion feature qualified for
equity classification.
Subsequently
in February 2010, the Company completed an exchange of the
outstanding convertible debentures for shares of convertible
preferred stock. The holders of 100% of the outstanding debentures
agreed to the exchange, and 15,250 shares of series A convertible
preferred stock were issued. Similar to the debentures, holders of
the Series A Convertible preferred stock are entitled to an annual
cash dividend of 10% payable semi-annually, and each share of
preferred stock is convertible into 50 shares of common stock at
the holder’s option. The holders of the preferred stock are
not entitled to redeem their shares for cash. In accordance with
ASC 470-20, the Company has determined that the preferred
stock includes a beneficial conversion feature and a discount
valued at $1,525,000 has been accounted for as a dividend in
2010.
During
the remainder of 2010, the Company issued 4,750 additional shares
of Series A Convertible preferred stock. The Company has determined
that these issuances also include beneficial conversion
features and discounts valued at $475,000 which has been accounted
for as dividends for the year ended December 31, 2010. These
proceeds were used for working capital purposes.
In
October 2010, the Company filed a certificate of designation with
the Delaware Secretary of State designating 10,000 shares of its
preferred stock as Series B Preferred stock. The issuance price of
the Series B Preferred stock is $100 per share and it is
convertible into 44.4 shares of common stock by the holder at any
time after the following conditions are met:
At
that time the Company may also elect to convert or redeem the
Series B Preferred stock. The conversion price is $2.25 per share
of common stock, subject to adjustment for stock dividends, stock
splits and reorganizations.
The
Company issued 6,000 shares of its Series B Preferred stock through
December 31, 2010. In the six months ended June 30, 2011, the
Company issued 4,000 shares of Series B Preferred stock. All shares
of the Series B Preferred Stock were issued to Patriot Rail
Services Inc. Gary O. Marino, the Company’s Chairman and
Chief Executive Officer, is also a significant stockholder of the
owner of Patriot Rail Services Inc. The preferred shares were
issued for $100 per share.
As
of June 30, 2011, Patriot Rail Services Inc. owned 3,000, 10,000
and 568,281 shares of Series A Preferred, Series B Preferred and
common stock, respectively. If converted Patriot Rail
Services Inc. would own 1,145,481 shares of common
stock.
In
July 2011, the Company filed a certificate of designation with the
Delaware Secretary of State designating 10,000 shares of its
preferred stock as Series C Preferred stock. The issuance price of
the Series C Preferred stock is substantially the same as Series A
and B Preferred stock with the exception of the conversion price
and the date of conversion as June 30, 2014.
The
conversion price will
be the closing price of the Company’s Common Stock on the
trading date preceding the issuance of that share of Series C
Preferred Stock, subject to adjustment for stock dividends, stock
splits and reorganizations. If the Common Stock is not
quoted on any market or exchange, the Conversion Price will be
determined by the Board of Directors on the date of
issuance.
The
Series C Preferred stock ranks senior to the common stock and
pari-passu with the Series A and Series B Preferred stock of the
Company as to dividends and distribution of assets upon the
liquidation, dissolution or winding up of the Company.
On
August 3, 2011, the Company issued 1,000 shares of its Series C
Preferred stock to Patriot Rail Services, Inc. The
preferred shares were issued for $100 per share, or $100,000 in the
aggregate at a conversion price of $2.06 per share of common
stock. The proceeds of the money received in 2011 were
used to fund working capital requirements.
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Banyan Rail Services Inc. - FORM 10-Q/A - XML - IDEA: XBRL DOCUMENT - September 12, 2011
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