Series A-2 Redeemable Convertible Preferred Stock	6 Months Ended
Jun. 30, 2015
Notes to Financial Statements
Note 8 - Series A-2 Redeemable Convertible Preferred Stock	On March 31, 2015, the Board of Directors designated 8,750 shares of 10% Convertible Series A-2 par value $.001 preferred stock. Each share of Series A-2 preferred stock has a liquidation preference of $35 per share and is convertible into 50 shares of common stock at a conversion price of $0.70 per common share. In the event of a liquidation, winding up, or dissolution of the Company, the Series A-2 ranks senior to Series B and B-1 and equal to the Series A and A-1 preferred stock. Holders of Series A-2 preferred stock have the right to one vote for each share of common stock into which such share of preferred stock could then be converted. Cumulative dividends accrue on the Series A-2 preferred stock at a rate of 10% of the $35 liquidation amount and are payable quarterly when and if declared by the Board of Directors. Through September 30, 2016, dividends are paid in kind, if they are not declared or previously paid in cash. During the three and six months ended June 30, 2015, there were $1,098 of preferred stock dividends accumulated, which were paid by issuance of 31 shares of Series A-2 preferred stock. Under certain conditions, the Company, at its option, may require conversion of all or any prorata portion of the Series A-2 preferred stock outstanding into common stock if such stock is registered and for twenty consecutive trading days the closing price equals or exceeds 150% of the conversion price then in effect, and the Company is current on its dividends on the Series A-2 preferred stock. On or after May 31, 2020, a holder can request the Company repurchase, on the date which is 30 calendar days thereafter, all shares of Series A-2 preferred stock held by the holder for cash equal to $35 per share plus accrued and unpaid dividends as of the repurchase date. The Company has the option whether or not to agree to the repurchase. In the event the Company fails to repurchase or payment of Series A-2 dividends is four quarters in arrears, the dividend rate will increase to 18% and the majority holders of Series A-2 preferred stock, voting together with holders of other equally ranking preferred stock, have the right to elect the majority of the board of directors. For each $35 of consideration, the Company is offering units (“A-2 Units”) consisting of (i) one share of A-2 preferred stock and (ii) 25 warrants to purchase one share of common stock through December 15, 2016 at $1.00 (“Series ‘15-I” warrants”). In the three months ended June 30, 2015, the Company sold 1,285 units for proceeds of $42,875, net of issuance costs of $2,100. Additionally, a director and his affiliates advanced $73,000 during the six months ended June 30, 2015 to the Company and the Company expects that a substantial portion of such advances will be converted into A-2 Units. Because the warrants were issued in conjunction with the Series A-2 preferred stock, the proceeds of the offering were allocated between the Series A-2 preferred and the warrants based on the relative fair value of each instrument. The assumed value of the Series A-2 preferred was determined based on the fair value of the underlying common shares and the fair value of the warrants was estimated by management and approximates the value using the Black-Scholes option pricing model.

Series A-2 Redeemable Convertible Preferred Stock

6 Months Ended

Jun. 30, 2015

Note 8 - Series A-2 Redeemable Convertible Preferred Stock

On March 31, 2015, the Board of Directors designated 8,750 shares of 10% Convertible Series A-2 par value $.001 preferred stock.

Each share of Series A-2 preferred stock has a liquidation preference of $35 per share and is convertible into 50 shares of common stock at a conversion price of $0.70 per common share. In the event of a liquidation, winding up, or dissolution of the Company, the Series A-2 ranks senior to Series B and B-1 and equal to the Series A and A-1 preferred stock. Holders of Series A-2 preferred stock have the right to one vote for each share of common stock into which such share of preferred stock could then be converted.

Cumulative dividends accrue on the Series A-2 preferred stock at a rate of 10% of the $35 liquidation amount and are payable quarterly when and if declared by the Board of Directors. Through September 30, 2016, dividends are paid in kind, if they are not declared or previously paid in cash. During the three and six months ended June 30, 2015, there were $1,098 of preferred stock dividends accumulated, which were paid by issuance of 31 shares of Series A-2 preferred stock.

Under certain conditions, the Company, at its option, may require conversion of all or any prorata portion of the Series A-2 preferred stock outstanding into common stock if such stock is registered and for twenty consecutive trading days the closing price equals or exceeds 150% of the conversion price then in effect, and the Company is current on its dividends on the Series A-2 preferred stock.

On or after May 31, 2020, a holder can request the Company repurchase, on the date which is 30 calendar days thereafter, all shares of Series A-2 preferred stock held by the holder for cash equal to $35 per share plus accrued and unpaid dividends as of the repurchase date. The Company has the option whether or not to agree to the repurchase. In the event the Company fails to repurchase or payment of Series A-2 dividends is four quarters in arrears, the dividend rate will increase to 18% and the majority holders of Series A-2 preferred stock, voting together with holders of other equally ranking preferred stock, have the right to elect the majority of the board of directors.

For each $35 of consideration, the Company is offering units (“A-2 Units”) consisting of (i) one share of A-2 preferred stock and (ii) 25 warrants to purchase one share of common stock through December 15, 2016 at $1.00 (“Series ‘15-I” warrants”). In the three months ended June 30, 2015, the Company sold 1,285 units for proceeds of $42,875, net of issuance costs of $2,100. Additionally, a director and his affiliates advanced $73,000 during the six months ended June 30, 2015 to the Company and the Company expects that a substantial portion of such advances will be converted into A-2 Units.

Because the warrants were issued in conjunction with the Series A-2 preferred stock, the proceeds of the offering were allocated between the Series A-2 preferred and the warrants based on the relative fair value of each instrument. The assumed value of the Series A-2 preferred was determined based on the fair value of the underlying common shares and the fair value of the warrants was estimated by management and approximates the value using the Black-Scholes option pricing model.