2. Preferred Stock Transactions
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3 Months Ended |
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Mar. 31, 2012
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Preferred Stock [Text Block] |
2. Preferred
Stock Transactions
The
Preferred Shares shall be convertible into common shares in
two equal traunches, the first being upon completion and
receipt of the year ending December 31, 2010, financials if
all of the following performance targets are met by EZ
Link:
(a)
Maintain revenues and before tax earnings same as the prior
12 month period; and
(b)
Maintained a positive cash flow from operations over the
prior 12 month period.
These
criteria were not met, so there were no conversions as of
December 31, 2010 or 2011. However, the first
tranche will be eligible for conversion again at December 31,
2012.
The
second tranche of the Preferred Shares shall be convertible
after the second 12 month period, i.e. the year ending
December 31, 2011, if all of the following performance
targets are met by EZ Link:
(a)
5% increase in revenues and 1% before tax earnings over the
prior 12 month period; and
(b)
Maintained a positive cash flow from operations over the
prior 12 month period.
EZ
Link did not reach its performance goals at December 31,
2011, so the conversion rights will be extended one
additional year.
ASC
Topic 480, “Distinguishing Liabilities from
Equity,” establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity.
A
mandatorily redeemable financial instrument shall be
classified as a liability unless the redemption is required
to occur only upon the liquidation or termination of the
reporting entity. A financial instrument issued in
the form of shares is mandatorily redeemable if it embodies
an unconditional obligation requiring the issuer to redeem
the instrument by transferring its assets at a specified or
determinable date (or dates) or upon an event certain to
occur. A financial instrument that embodies a
conditional obligation to redeem the instrument by
transferring assets upon an event not certain to occur
becomes mandatorily redeemable—and, therefore, becomes
a liability—if that event occurs, the condition is
resolved, or the event becomes certain to occur.
The
Company determined that the preferred shares are not
mandatorily or conditionally redeemable and are properly
classified as permanent equity in the accompanying
consolidated financial statements.
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