Stockholders' equity

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

11. Stockholders’ equity

CBS is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. Upon exchange of the Class B Units in accordance with the Exchange and Support Agreement among the Members, Holdings and CBS that was entered into in connection with the Merger (see “Reverse merger”, Note 1), shares of CBS common stock will be issued at the current ratio of 1:1 (subject to certain adjustments related to organic dilution), and, concurrently therewith, a proportionate number of shares of Series A Preferred Stock will, subject to the availability of lawful funds therefor, be automatically redeemed for their $0.0001 par value and cancelled at the current ratio of 1:10, at which time they will become authorized but unissued shares of preferred stock. Except in connection with the exchange of the Class B Units, the Series A Preferred Stock is not redeemable.

On November 14, 2011, Crumbs entered into an employment agreement with Julian R. Geiger (the “Geiger Employment Agreement”) pursuant to which Mr. Geiger will serve as President and Chief Executive Officer of Crumbs commencing November 14, 2011 and continuing through December 31, 2013. The Geiger Employment Agreement provides that Mr. Geiger shall receive no salary nor participate in any bonus plan of Crumbs that may be in effect during its term. Crumbs agreed that promptly following execution of the Geiger Employment Agreement, Holdings would grant to him 799,000 Class B Units and CBS would grant to him 79,900 shares of Series A Preferred Stock, subject to the following vesting provisions:

· 50% of the 799,000 Class B Units and of the 79,900 shares of the Series A Preferred Stock would vest as of November 14, 2011 (such securities, the “First Tranche”); and

· the remaining 50% of the 799,000 Class B Units and of the 79,900 shares of Series A Preferred Stock would vest on November 14, 2012 (such securities, the “Second Tranche”).

Concurrent with the execution of the Geiger Employment Agreement, EHL Holdings LLC and Bauer Holdings, Inc. (formerly Crumbs, Inc.) agreed to forfeit an aggregate of 799,000 Class B Units and 79,900 shares of the Series A Preferred Stock.

In 2011, staff expense related to this stock-based compensation was recorded in connection with this transaction in the amount of $1,877,650, the value of the First Tranche, calculated based upon the price of a share of CBS common stock on November 14, 2011. When the Second Tranche vested on November 14, 2012, additional non-cash staff expense related to this stock-based compensation of $1,877,650 was recorded, calculated based upon the price of a share of CBS common stock on November 14, 2011. On October 9, 2012, pursuant to the Exchange and Support Agreement, (a) Mr. Geiger exchanged, for no consideration other than the surrender thereof, 319,600 Class B Units and 31,960 shares of Series A Preferred Stock that he owned for 319,600 shares of CBS common stock, (b) EHL Holdings, LLC exchanged, for no consideration other than the surrender thereof, 694,700 Class B Units and 69,470 shares of Series A Preferred Stock that it owned for 694,700 shares of CBS common stock, (c) John D. Ireland exchanged, for no consideration other than the surrender thereof, 39,000 Class B Units and 3,900 shares of Series A Preferred Stock that he owned for 39,000 shares of CBS common stock, and (d) Bauer Holdings, Inc. exchanged, for no consideration other than the surrender thereof, 506,700 Class B Units and 50,670 shares of Series A Preferred Stock that it owned for 506,700 shares of CBS common stock.

On October 10, 2012, CBS entered into a Securities Purchase Agreement (the “Stock Purchase Agreement”) with Special Situations Fund III QP, L.P., Special Situations Cayman Fund, L.P., Special Situations Private Equity Fund, L.P. (collectively, the “Special Situations Funds”), Buckingham RAF Partners, L.P., Buckingham RAF Partners II, L.P., Buckingham RAF International Partners Master Fund, LP, Whitney Capital Series Fund LLC – Series LS1, Durban Capital LP, John Mills, P.A.W. Partners, L.P., P.A.W. Small Cap Partners, L.P., Prism Partners I, L.P., Prism Partners III Leveraged, L.P., Prism Partner IV Leveraged Offshore Fund, Arthur J. Samberg, Leonard Potter, Frederick Kraegel, Jeffrey Roseman, Mark Klein, and Julian Geiger (collectively, the “Investors”). Pursuant to the Stock Purchase Agreement, CBS agreed to sell an aggregate 4,456,968 shares of CBS’ common stock to the Investors at a purchase price of $2.21 per share (the “Capital Transaction”).

The shares issued in the Capital Transaction were sold only to accredited investors in a private placement in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder.

The closing of the Capital Transaction and the sale of the shares thereunder took place on October 11, 2012. CBS received aggregate gross proceeds of $9,849,900 as a result of the Capital Transaction. After deducting the expenses of the Capital Transaction, CBS’ net proceeds were approximately $9,271,000.