IS ALL THE SERIES PREFERRED & CONVERTIBLE DEBT A PROBLEM HERE?
NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE
Convertible notes payable consist of the following at June 30, 2015 and December 31, 2014:
All common share data in this table have been adjusted for the reverse stock split.
June 30, 2015 December 31, 2014
On January 16, 2012 the Company executed a promissory note for $50,000. The note bears interest at 10 % and is secured by common stock of the Company. The note is convertible into common stock of the Company at $0.05 per share. In 2012, $30,000 of the note was converted to 17,595 shares of common stock of the Company. In 2013 the note maturity date was extended to September 30, 2015. Due to the features in this note, the Company could not determine if sufficient shares in the Company stock would be available to fulfill all conversion obligations .Accordingly a derivative liability was recorded for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 882%, and an assumed dividend rate of 0%: with the expected term of 92 days. 20,000 20,000
On March 5, 2013 the Company executed a promissory note for $45,000. In 2014 the note was modified into three notes of $15,000 each. The notes bear interest at 8 % are unsecured. The notes matured March 5, 2014 but were extended to September 30, 2015. One of the notes was sold to a third party and amended. Due to the amended features the Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 765%, and an assumed dividend rate of 0%: with the expected term of 92 days. The remaining two $15,000 notes are also convertible into common stock at the market price but no derivative liability was recorded. In February 2014, the third party converted $5,000 of note into 16,955 shares of common stock of the Company. During the first quarter of 2015, the third party converted $1,764 of the note into 352,941 shares of common stock of the Company. During the second quarter of 2015, the third party converted $6,246 of the note into 2,621,621 shares of common stock of the Company. 2,004 10,015
On March 5, 2013 the Company executed a promissory note for $45,000. In 2014 the note was modified into three notes of $15,000 each. The notes bear interest at 8 % are unsecured. The notes matured March 5, 2014 but were extended to September 30, 2015. One of the notes was sold to a third party and amended. Due to the amended features the Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 765%, and an assumed dividend rate of 0%: with the expected term of 92 days. The remaining two $15,000 notes are also convertible into common stock at the market price but no derivative liability was recorded. On February 10, 2015, the note was purchased and the terms and the maturity date were changed. The new terms beared a 12% interest rate. The note can be converted into common stock at a discount of 55% off the conversion price. The conversion price is the average 3 day lowest closing sales price during a 10 day period prior to conversion, but no less than $0.0001. A debt extinguishment was booked due to the changes in terms. The note matures on February 10, 2016. 15,000 15,000
On September 11, 2013 the Company executed a promissory note for $15,000 as payment to a service provider. The note matured September 11, 2014 but was extended to September 30, 2015. The note is convertible into common stock of the Company at a discount of 35% off the average one day bid price the day prior to conversion with the expected term of 225 days. Due to the discount feature we have recorded a liability of $8,077, or put premium, as part of the carrying value of this note. The note is convertible at any time prior to maturity and bears interest at 6% per annum. During the second quarter of 2015, the third party converted $4,257 of the note into 7,740,600 shares of common stock of the Company. 8,738 15,000
On October 29, 2013 the Company executed a promissory note for $2,500. The note bears interest at 6% and is secured by common stock of the Company. The loan matures April 29, 2014 but was extended to September 30, 2015. The note is convertible at the lower of a day’s discount of 35% off the prior closing bid price or $0.01. The note also provided for purchase of 133,334 shares by execution of a warrant agreement. The agreement expires two years from the date of the note. Under this agreement shares can be purchased for $0.02 unless the Company sells stock at a price below that level. Should this occur the conversion price is reduced to that lower price. The Company used the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 599%, and an assumed dividend rate of 0% with the expected term of 92 days. 2,500 2,500
F- 9
On January 01, 2014 the Company executed a promissory note for $20,000 as payment to a service provider. The note is convertible into common stock of the Company at a discount of 35% off the average one day bid price the day prior to conversion. Due to the discount feature we have recorded a liability of $10,769, or put premium, as part of the carrying value of this note. The note is convertible at any time prior to maturity and bears interest at 6% per annum. The note matured on January 01, 2015 but was extended to September 30, 2015. The note is considered a stock settled debt instrument. The expected term is 92 days. 20,000 20,000
In February 2014, a note with a face value of $22,000 was sold to a third party. In February 2014, the third party converted $11,000 of the note into 24,445 shares of common stock of the Company. During the first quarter of 2015, the third party converted $2,738 of the note into 730,000 shares of common stock of the Company. The note matured on January 01, 2015 but was extended to September 30, 2015. The note is considered a stock settled debt instrument. The expected term is 92 days. 8,263 11,000
On January 23, 2014 the Company executed a promissory note for $6,000. The note bears interest at 9.875 % and is secured by common stock of the Company. The note can be converted into common stock at a discount of 30% off the conversion price. The conversion price is the average 3 day lowest closing sales price during a 10 day period prior to conversion, but no less that $0.0001. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 321%, and an assumed dividend rate of 0% with the expected term of 92 days. The note matured on January 23, 2015 but was extended to September 30, 2015. 6,000 6,000
On March 17, 2014 the Company executed a promissory note for $25,000. The note bears interest at 12 % and is secured by common stock of the Company. The note can be converted into common stock at a discount of 40% off the conversion price. The conversion price is the average of the lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells or issues stock at a price lower than the conversion price. Should this occur the conversion price is reduced to that lower price. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 296%, and an assumed dividend rate of 0% with the expected term of 92 days. In November 2014, the third party converted $7,135 of note into 366,598 shares of common stock of the Company. During the first quarter of 2015, the third party converted $6,612 of the note into 1,569,580 shares of common stock of the Company. During the second quarter of 2015, the third party converted $10,683 of the note into 13,427,276 shares of common stock of the Company. The note matured on March 17, 2015 but was extended to September 30, 2015. 569 17,865
On June 9, 2014 the Company executed a promissory note for $30,000. The note bears interest at 8% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 42% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion. The Company has recorded the derivitive liability for this note using the Black Scholes Method to value the derivitive liabiltiy with the following assumptions: Risk free interest rate of .025, volitility of 276% and an assumed dividend of 0% with the expected term of 92 days. During the first quarter of 2015, the third party converted $12,098 of the note into 2,656,309 shares of common stock of the Company. During the second quarter of 2015, the third party converted $12,011 of the note into 21,721,132 shares of common stock of the Company. The note matured on June 9, 2015 but was extended to September 30, 2015. 5,892 30,000
On June 11, 2014 the Company executed a promissory note for $86,500. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or $0.0135 whichever is greater. The Company has recorded the derivitive liability for this note using the Black Scholes Method to value the derivitive liabiltiy with the following assumptions: Risk free interest rate of .025, volitility of 276% and an assumed dividend of 0% with the expected term of 92 days. During the first quarter of 2015, the third party converted $40,040 of the note into 6,860,160 shares of common stock of the Company. During the second quarter of 2015, the third party converted $43,098 of the note into 54,315,828 shares of common stock of the Company. The note matured on June 11, 2015 but was extended to September 30, 2015. 3,361 86,500
F- 10
On June 11, 2014 the Company executed a promissory note for $86,291 for the note plus interest on the note executed March 13, 2013. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or $0.0135 whichever is greater. The Company has recorded the derivitive liability for this note using the Black Scholes Method to value the derivitive liabiltiy with the following assumptions: Risk free interest rate of .025, volitility of 276% and an assumed dividend of 0%. In June 2014, the third party converted $13,319 of note into 56,000 shares of common stock of the Company. In July 2014, the third party converted $4,510 of note into 40,000 shares of common stock of the Company. In August 2014, the third party converted $5,077 of note into 93,334 shares of common stock of the Company. In September 2014, the third party converted $12,311 of note into 420,000 shares of common stock of the Company. In October 2014, the third party converted $14,111 of note into 655,334 shares of common stock of the Company. In November 2014, the third party converted $13,816 of note into 753,334 shares of common stock of the Company. In December 2014, the third party converted $4,670 of note into 626,667 shares of common stock of the Company. During the first quarter of 2015, the third party fully converted the remaining balance of the note into 1,170,667 shares of common stock of the Company. - 5,542
On June 30, 2014 the Company executed a promissory note for $88,500. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at the bid price on day prior to conversion. On February 10, 2015, the note was purchased and the terms and maturity date were changed. The note matures on February 10, 2016. The new terms beared a 8% interest rate. The note can be converted into common stock at a discount of 55% off the conversion price. The conversion price is the average 3 day lowest closing sales price during a 10 day period prior to conversion, but no less that $0.0001. A debt estinguishment was booked due to the changes in terms. During the first quarter of 2015, the third party converted $9,382 of the note into 1,834,300 shares of common stock of the Company. During the second quarter of 2015, the third party converted $16,601 of the note into 13,758,452 shares of common stock of the Company. The expected term is 225 days. 64,521 88,500
On August 8, 2014 the Company executed a promissory note for $50,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 35% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001, whichever is lower. On April 8, 2015 the note was modified by $15,000. The terms of that portion of the note has changed and bears interest at 6% are unsecured. The note has a maturity date of August 8, 2015. The expected term of the note is 39 days. 35,000 50,000
On April 3, 2014 the Company executed a promissory note for $42,500. The note bears interest at 22% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells or issues stock at a lower price than the conversion price. Should this occur the conversion prices is reduced to the lower price. The Company has recorded the derivitive liability for this note using the Black Scholes Method to value the derivitive liabiltiy with the following assumptions: Risk free interest rate of .025, volitility of 292% and an assumed dividend of 0% with the expected term of 92 days. During the first quarter of 2015, the third party converted $17,525 of the note into 3,728,015 shares of common stock of the Company. During the second quarter of 2015, the third party converted $19,671 of the note into 29,078,917 shares of common stock of the Company. The note matured on April 3, 2015 but was extended to September 30, 2015 5,304 42,500
On July 8, 2014 the Company executed a promissory note for $42,500. The note bears interest at 22% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells or issues stock at a lower price than the conversion price. Should this occur the conversion prices is reduced to the lower price. The Company has recorded the derivitive liability for this note using the Black Scholes Method to value the derivitive liabiltiy with the following assumptions: Risk free interest rate of .025, volitility of 270% and an assumed dividend of 0% with the expected term of 7 days. The note matured on July 8, 2015 but was extended to September 30, 2015. 42,500 42,500
F- 11
On September 5, 2014 the Company executed a promissory note for $52,500. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 55% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or the stock can be converted at $0.0135, whichever is greater. This note matures on September 5, 2015. he Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 425%, and an assumed dividend rate of 0%. 52,500 52,500
On October 27, 2014 the Company executed a promissory note for $52,500. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 55% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or the stock can be converted at $0.0135, whichever is greater. This note matures on October 27, 2015. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk FreeInterest rate of .025, volatility of 373%, and an assumed dividend rate of 0% with the expected term of 77 days. 52,500 52,500
On December 11, 2014 the Company executed a promissory note for $40,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 35% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001. On June 11, 2015, the note was purchased and the terms and maturity date were changed. The new terms beared a 6% interest rate. The note can be converted into common stock at a discount of 50% off the conversion price. The conversion price is the average 3 day lowest closing sales price during a 10 day period prior to conversion. A debt estinguishment was booked due to the changes in terms. The note matures on June 11, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 337%, and an assumed dividend rate of 0% with the expected term of 164 days. 40,000 40,000
On January 5, 2015 the Company executed a promissory note for $20,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 70% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001. The note matures on January 5, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk FreeInterest rate of .025, volatility of 328%, and an assumed dividend rate of 0% with the expected term of 189 days. 20,000 -
On January 31, 2015 the Company executed a promissory note for $176,267. The note bears interest at 6% and is secured by common stock of the Company. The conversion price is the bid price on the day prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001. The note matures on January 31, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk FreeInterest rate of .025, volatility of 317%, and an assumed dividend rate of 0% with the expected term of 185 days. 176,268 -
On February 10, 2015 the Company executed a promissory note for $52,500. The note bears interest at 8% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 55% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001. The note matures on February 10, 2016 The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 285%, and an assumed dividend rate of 0% with the expected term of 225 days.. 52,500 -
F- 12
On February 13, 2015 the Company executed a promissory note for $30,000. The note bears interest at 8% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 42% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001. The note matures on February 13, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk FreeInterest rate of .025, volatility of 269%, and an assumed dividend rate of 0% with the expected term of 228 days. 30,000 -
On February 13, 2015 the Company executed a promissory note for $50,000. The note bears interest at 8% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 70% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001. The note matures on February 13, 2016 The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk FreeInterest rate of .025, volatility of 269%, and an assumed dividend rate of 0% with the expected term of 228 days. 50,000 -
On January 26, 2015 the Company executed a promissory note for $28,000. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at 50% of the Market price. The note matures on January 26, 2016. The note is considered a stock settled debt instrument. The expected term is 210 days. 28,000 -
On March 17, 2015 the Company executed a promissory note for $28,000. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at 50% of the Market price. The note matures on March 17, 2016. The note is considered a stock settled debt instrument. The expected term is 261 days. 28,000 -
On June 30, 2015, the Company executed a promissory note for $150,333. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at bid price on the day prior to conversion . The note matures on June 30, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 46%, and an assumed dividend rate of 0% with the expected term of 366 days. 150,333 -
On June 30, 2015, the Company executed a promissory note for $62,229. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at bid price on the day prior to conversion . The note matures on June 30, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 46%, and an assumed dividend rate of 0% with the expected term of 366 days. 62,229 -
On June 12, 2015, the Company executed a promissory note for $40,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at average closing price of the previous 3 days . The note matures on June 12, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 89%, and an assumed dividend rate of 0% with the expected term of 348 days. 40,000 -
On April 10, 2015, the Company executed a promissory note for $31,500. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at 60% of the average of the two lowest closing prices in the 25days price to convesion. The note matures April 10, 2015. The note is considered a stock settled debt instrument. The expected term is 285 days. 31,500 -
F- 13
On April 4, 2015, the Company executed a promissory note for $25,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at average closing price of the previous 3 days . The note matures on April 4, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 185%, and an assumed dividend rate of 0% with the expected term of 279 days. 25,000 -
On May 13, 2015, the Company executed a promissory note for $25,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at average closing price of the previous 3 days . The note matures on May 13, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 135%, and an assumed dividend rate of 0% with the expected term of 318 days. 25,000 -
On June 23, 2015, the Company executed a promissory note for $25,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at average closing price of the previous 3 days . Then note matures on June 23, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 68%, and an assumed dividend rate of 0% with the expected term of 359 days. 25,000 -
On June 16, 2015, the Company executed a promissory note for $25,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at average closing price of the previous 3 days. The note matures on June 16, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 86%, and an assumed dividend rate of 0% with the expected term of 352 days. 25,000 -
On May 28, 2015, the Company executed a promissory note for $23,000. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at 55% of the Conversion price. The conversion price is the average closing bid price on the 3 days prior to the date of conversion. The note matures on May 28, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 110%, and an assumed dividend rate of 0% with the expected term of 333 days. 23,000 -
On April 1, 2015, the Company executed a promissory note for $12,000. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at average closing price of the previous 3 days . The note matures on April 1, 2016. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 185%, and an assumed dividend rate of 0% with the expected term of 276 days. 12,000 -
On April 30, 2015, the Company executed a promissory note for $7,500. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at 50% of the Market price. The Market price is the average closing bid price on the 3 days prior to the date of conversion. The note matures on April 30. 2016. The note is considered a stock settled debt instrument. The expected term is 305 days. 7,500 -
On April, 8 2015, the Company executed a promissory note for $7,408. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at 50% of the Market price. The Market price is the average closing bid price on the 3 days prior to the date of conversion. During the second quarter of 2015, the third party converted $7,592 of the note into 8,633,577 shares of common stock of the Company. The note matures on April 8, 2016. The note is considered a stock settled debt instrument. The expected term is 283 days 7,406 -
Premium liability 29,846 29,846
Unamortized debt discount on derivative liabilities (426,759 ) (248,811 )
Total convertible notes outstanding, net of unamortized discounts 806,475 388,957
F- 14
FRESH P RO M I S E FOOD S , INC.
N O TES TO T H E U N AUDIT E D C O NSOL I D A TED FIN A N C IAL ST A T E M E NTS
June 30, 2015
NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)
The authorized common stock of the Company consist of 2,000,000,000 shares with a par value $0.00001. The Company also has 100,000,000 shares of par value $0.00001 Preferred C stock authorized and 10 shares of par value $0.00001 Preferred B stock authorized.
Series A Preferred stock has been cancelled.
Series B Preferred
Designation
This class of stock of this Corporation shall be named and designated "Series B Preferred Stock". It shall have 10 shares authorized at $0.00001 par value per-share.
Conversion Rights
a. If at least one share of Series B Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series B Preferred Stock at any given time, regardless of their number, shall be convertible into the number of shares of Common Stock which equals four times the sum of; i) the total number of shares of Common Stock which are issued and outstanding at the time of conversion, plus ii) the total number of shares of Series B and Series C Preferred Stocks which are issued and outstanding at the time of conversion. The stock certificate(s) evidencing the Common Stock shall be issued with a restrictive legend indicating that it was issued in a transaction exempt from registration under the Seourities Act of 1933, as amended (the "Securities Act"), and that it cannot be transferred unless it is so registered, or an exemption from registration is available, in the opinion of counsel to the Corporation.
b. Each individual share of Series B Preferred Stock shall be convertible into the number of shares of Common Stock equal to:
[four times the sum of (all shares of Common Stock issued and outstanding at time of conversion + all shares of Series B and Series C Preferred Stock issued and outstanding at'time of conversion)]
divided by:
[the number of shares of Series B Preferred Stock issued and outstanding at the time of conversion]
Issuance
Shares of Series B Preferred Stock may only be issued in exchange for the partial or full retirement of debt held by Management, employees or consultants, or as directed by a majority vote of the Board of Directors. The number of shares of Series B Preferred Stock to be issued to each qualified person (member of Management, employee or consultant) holding a Note shall be determined by the following formula:
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