Take a look at the filing in March on OTC site. The company authorized 50 million shares of preferred stock designated as series C. They issued 5 million shares of series C at the value of 5$ per share. The terms of the series C didn't state any restrictions what so ever. The holder of series C has the right to convert at any time into common shares at their choosing. The holder just have to submit the request and surrender their certificate, and the company has 90 days to fulfill that conversion request. The only restriction is that the converted common shares cannot exceed 4.9% of the company stock. Although not all series C holder will convert into common shares, but no doubt some will opt to cash in. I have no doubt many sold off at the 0.15 peak. Between March and now, they probably made a good double on the return. Issuing convertibles is bad news, if you were pay attention to their filings, the recent drop was expected. Also, should the series C be declared dividend, the company will be paying the dividend with common shares. There you go, making dividend payments using common shares. Senior notes comes with interest payments quarterly, otherwise, people aren't going to want to hold them if they aren't generating returns. Plain and simple. If you were investor, would you buy preferred stock that pays nothing? Nope, you will want to convert to cheaper common shares and sell off for profit.
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