Replies to post #8534 on Dr Foods Inc. (DRFS)

[xZx]

i recalled seeing that provision also. at the time, it made me wonder if we might see a huge % of the OS converted at once.

the only gain from doing that would be if news is en route, and big enough news the lender is feeling greedy. otherwise, why not convert the 4.99% batches, as usual?

[GoAndCollect]

Derivative liabilities


Under FASB ASC 815-40 Contracts in Entity’s Own Equity, the Company must review the possible conversion features under the agreement’s variable price conversion options, which create a derivative in the possible settlement choices of the Lender. As of December 31, 2015, the stock pricing feature for Note A above which provides a 50% discount to the market would have increased the stock necessary to settle the conversion if requested to approximately 417,117,892 shares. The Company has calculated the value of this additional liability to be $702,369 and has recognized a change of earnings for the effect of such a conversion through December 31, 2015. Additionally, the conversion features on Notes B, C, D, E and F above would have increased the stock necessary to settle the conversion feature on these Notes to approximately 98,253,949 shares. The Company has calculated the value of this additional liability to be $123,343 and has recognized a change of earnings for the effect of such a conversion through December 31, 2015. Total derivative liability was $825,712 and $1,319,188, as of December 31, 2015 and December 31, 2014, respectively. As of December 31, 2015, the derivative liability is classified as $76,955 under current liabilities and $748,757 under long-term liabilities. As of December 31, 2014, the derivative liability is classified as $780,744 under current liabilities and $538,444 under long-term liabilities.


Under FASB ASC 505-10 Equity : Overall, the Company must disclose that the settlement alternatives are at the control of the Lender and that there is a potential for an infinite number of shares having to be issued, although the Lender has elected to limit its beneficial ownership to less than five percent unless the Company receives proper notification that the Lender will at any time convert either part or all of the loan to shares.