PREFERRED STOCK

9 Months Ended

Sep. 30, 2016

NOTE 12-PREFERRED STOCK

The Company has authorized 10,000,000 shares of preferred stock, par value $0.001 per share. With respect to the preferred stock, the Company designated: 140,000 shares as Series B Convertible Preferred Stock, of which 133,000 shares are issued and outstanding; 175,000 shares as Series C-1 Convertible Preferred Stock, of which 34,625 shares are issued and outstanding; 375,000 shares of Series D Convertible Preferred Stock, of which 304,377 are issued and outstanding. As a result of the Reverse Split (on a 1 for every 15 shares outstanding basis (See Note 13(a) – Subsequent Events) ) completed in January, 2017, all Series E Preferred Stock automatically was deemed converted into Common Stock and therefore all financial statements reflect the conversion.

At September 30, 2016 and December 31, 2015, the Company had:

					ACCRUED DIVIDENDS
			ISSUED AND		PAYABLE
	DESIGNATED		OUTSTANDING		SEPTEMBER 30,		DECEMBER 31,
	SHARES		SHARES		2016		2015

Series B		140,000		133,000	$	2,527,000	$	2,128,000
Series C-1		175,000		34,625		526,300		443,200
Series D		375,000		304,377		1,850,600		1,558,400
					$	4,903,900	$	4,129,600

The Company has not issued or created any shares or classes of preferred stock since 2012. No shares of any class of preferred stock were converted into Common Stock during the year ended December 31, 2015. No shares of preferred stock were issued during the nine or three months ended September 30, 2016 and 2015.

Each share of Series B Preferred Stock is convertible into 6.66 shares of the Company’s common stock, subject to adjustment under certain circumstances, based upon a stated value of $50.00 per share. There are 133,000 shares of Series B Preferred Stock issued and outstanding, convertible into 886,666 shares of Common Stock. The Series B Preferred Stock is convertible at the option of the holder at any time. The Series B Preferred Stock is also subject to mandatory conversion in the event the average closing price of the Company’s common stock for any ten day period equals or exceeds $15.00 per share, such conversion to be effective on the trading day immediately following such ten day period. The Series B Preferred Stock has a dividend equal to 8% of the aggregate $7,000,000 stated value of the Series B Preferred Stock, payable annually in cash or stock, at the discretion of the Company’s board of directors. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to the holders of any stock of the Company, the holders of Series B Stock are entitled to be paid out of the assets of the Company, proportionally with any other series of preferred stock, an amount per share of Series B Stock equal to the stated value (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares), plus all accrued but unpaid dividends (whether declared or not) on such shares of Series B Stock for each share of Series B Stock held by them. With respect to the Series B Preferred Stock, the Company has accrued undeclared and unpaid dividends of $2,527,000 and $2,128,000 at September 30,2016 and December 31,2015, respectively. The dividend per calendar quarter is $133,000.

Each share of Series C-1 Preferred Stock is convertible into 6.66 shares of the Company’s common stock, subject to adjustment under certain circumstances, based upon a stated value of $40.00 per share. There are 34,625 shares of Series C-1 Preferred Stock issued and outstanding, convertible into 230,833 shares of Common Stock. The Series C-1 Preferred Stock is convertible at the option of the holder at any time. The Series C-1 Preferred Stock is also subject to mandatory conversion in the event the average closing price of the Company’s common stock for any ten day period equals or exceeds $15.00 per share, such conversion to be effective on the trading day immediately following such ten day period. The Series C-1 Preferred Stock has a dividend rate of 8% payable annually in cash or stock, at the discretion of the Company’s board of directors. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to the holders of any stock of the Company, the holders of Series C-1 Stock are entitled to be paid out of the assets of the Company, proportionally with any other series of preferred stock, an amount per share of Series C-1 Stock equal to the stated value (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares), plus all accrued but unpaid dividends (whether declared or not) on such shares of Series C-1 Stock for each share of Series C-1 Stock held by them. With respect to the Series C-1 Preferred Stock, the Company has accrued undeclared and unpaid dividends of $526,300 and $443,200 at September 30, 2016 and December 31, 2015, respectively. The dividend per calendar quarter is $27,700.

The Series D preferred stock has an annual dividend equal to 8% of the aggregate $5,220,000 stated value of the preferred stock ($16.00 per share), payable annually in cash or stock, at the discretion of the Company’s board of directors. There are 304,377 shares of Series D Preferred Stock issued and outstanding, convertible into 2,029,180 shares of Common Stock. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to the holders of any stock of the Company, the holders of Series D preferred stock are entitled to be paid out of the assets of the Company, proportionally with any other series of preferred stock, an amount per share of Series D preferred stock equal to the stated value (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares), plus all accrued but unpaid dividends (whether declared or not) on such shares of Series D preferred stock for each share of Series D preferred stock held by them.

The conversion price for the Series D preferred stock is $0.16 per share, and the Series D preferred stock is subject to mandatory conversion of 100 common shares per 1 Series D preferred share, in the event the average closing price of the Company’s common stock for any ten day period equals or exceeds $7.50 per share and the average daily trading volume is at least 50,000 shares of common stock per day during such ten-day period, such conversion to be effective on the trading day immediately following such ten day period. Series D preferred stock shall vote with the shares of Common Stock on an as converted basis from time to time, and not as a separate class, at any duly called annual or special meeting of stockholders of the Company. The holders of our Series D preferred stock have no pre-emptive rights, and the Company cannot amend the Series D preferred stock’s Certificate of Designation without first obtaining the approval of 75% of the holders of the outstanding Series D preferred stock. With respect to the Series D Preferred Stock, the Company has accrued undeclared and unpaid dividends of $1,850,600 and $1,558,400 at September 30,2016 and December 31,2015, respectively. The dividend per calendar quarter is $97,400.

On January 27, 2012 and January 30, 2012, the Company consummated closings of a private placement offering for an aggregate of 305 shares of Series E Convertible Preferred Stock, par value of $0.001 per share. The Series E Preferred Stock carried no dividend, and each share of Series E Preferred Stock was convertible into 66,667 shares of Common Stock and also had voting rights on the same basis. As a result of the Reverse Stock Split consummated in January 2017, all shares of Series E Preferred Stock have been deemed converted into shares of Common Stock (an aggregate of 20,333,333 shares).

POWER EFFICIENCY CORP 10-Q