Non-Controlling Interest-Issuance of Preferred Stock by Subsidiaries

6 Months Ended

Jun. 30, 2022

Non-Controlling Interest-Issuance of Preferred Stock by Subsidiaries [Abstract]

Non-Controlling Interest-Issuance of Preferred Stock by Subsidiaries

NOTE 11:  Non-Controlling Interest-Issuance of Preferred Stock by Subsidiaries

On April 9, 2019, The Company’s subsidiary, I-ON Communication Korea issued 157,142 shares of redeemable convertible preferred stock at a price of KRW3,500 per share for proceeds of KRW549,997,000. The convertible preferred stock agreement contain provisions as follows:

● Voting rights – The preferred shareholder may have same voting rights as common stock shareholder (1:1)

● 2% annual dividend

● Liquidating rights

● Conversion rights to common stock

● Call option by preferred shareholder - Preferred stock may be converted to common stock anytime at a fixed conversion price of KRW 3,500

● Call option by I-ON Communication – Should I-ON Communication exercise to redeem preferred stock, I-ON Communication is required to re-purchase for KRW 3,500 per share and 7% annual interest compounded.

The convertible preferred shares meet definition of equity instrument and contain a put option that is not outside the Company’s control and the conversion to common stock is at a fixed, determinable share conversion price of KRW 3,500 per share.

On November 22, 2021, the Company’s subsidiary, e.FormWorks Co., Ltd. (Korea) issued redeemable convertible preferred stock with proceeds of KRW 733,270,800 and issued 443,600 shares of preferred stock at a price of KRW 1,653 per share.

The convertible preferred stock agreement contain provisions as follows:

● Voting rights – The preferred shareholder may have same voting rights as common stock shareholder (1:1)

● 1% annual dividend

● Liquidating rights

● Conversion rights to common stock

o Call option by preferred shareholder – Preferred stock may be converted to common stock anytime at a fixed conversion price of KRW 1,653

o Call option by I-ON Digital – Should I-ON Digital exercise to redeem preferred stock, I-ON Digital is required to repurchase for KRW 1,653 per share and 6% annual interest compounded.

The convertible preferred shares meet definition of equity instrument and contain a put option that is not outside the Company’s control and the conversion to common stock is at a fixed determinable share conversion price at KRW 1,653 per share.

The Company accounted the issuance of preferred stock under ASC 810-10-45-23, Consolidation, and was accounted for as equity transaction as the parent’s ownership interest retains control of a subsidiary.   The preferred stock issuance by a subsidiary to noncontrolling interest holders should be reflected as a noncontrolling interest in the financial statements of the parent at the amount of the cash proceeds received.