Preferred Stock

9 Months Ended

Nov. 30, 2018

Preferred Stock

On September 22, 2015, the Company amended and restated its Articles of Incorporation to create and authorize four (4) classes of preferred stock. The Company has authorized Series A, Series B, Series C and Series D Preferred Stock (the “Preferred Stock”).

Series A Preferred Stock:

Series A preferred shares have a par value of $0.0001, and are convertible into common shares at $1.00 per common share. Series A preferred shares rank senior to common stock with respect to the right to participate in distributions or payments in the event of liquidation, dissolution, or winding up of the Company. Holders of Series A preferred shares are entitled to a preferred return equal to the purchase price paid for such Series A preferred shares. Series A preferred shares do not have any voting rights.

Holders of Series A preferred shares are not entitled to preemptive rights to purchase stock in future stock offerings of the Company. Holders of Series A preferred shares have the right to register their unregistered stock when either the Company or another investor initiates a registration of the Company’s securities, and they have the right of co-sale. Holders of Series A preferred shareholders are not required to sell all of their Series A preferred shares on the same terms or conditions of a co-sale by a majority shareholder. There is no right of first refusal for Series A preferred shares.

Series B Preferred Stock:

Series B preferred shares have a par value of $0.0001, and are convertible into common shares at a rate of 100 common shares per preferred share. Series B preferred shares are entitled to cast 500 votes for each preferred share owned. Series B preferred shares are senior to common shares with respect to the right to participate in distributions or payments in the event of any liquidation, dissolution, or winding up of the Company, and holders of Series B preferred shares are entitled to receive a preferred return equal to the purchase price paid for such Series B preferred stock.

Holders of Series B preferred shares are entitled to preemptive rights to purchase stock in future offerings, and have the right to register their unregistered stock when either the Company or another investor initiates a registration of the Company’s securities. Holders do not have the right of co-sale, and are not required to sell all of their Series B preferred shares on the same terms or conditions of a co-sale by a majority shareholder. If any Series B preferred shareholder wishes to sell, transfer or otherwise dispose of any or all of their Series B preferred shares, the other Series B preferred shareholders shall not have a prior right to buy such Series B preferred shares.

Series C Preferred Stock:

Series C preferred shares have a par value of $0.0001, and are convertible into common shares at a rate of $1.00 per common share. Series C preferred shares are not entitled to any voting rights, unless such vote is to modify rights, preferences, privileges and restrictions granted to and imposed on Series C preferred shares. Series C preferred shares are senior to common shares and Series B preferred shares with respect to the right to participate in distributions or payments in the event of any liquidation, dissolution, or winding up of the Company, and holders of Series C preferred shares are entitled to receive a preferred return equal to the purchase price paid for such Series C preferred, which is deemed to be $600,000. If the closing price per share of the Company’s common shares is less than $1.00 for a period of five consecutive trading days, the YP Holdings will have the one-time right, exercisable at its discretion, to require that the conversion price of the shares become equal to 75% of the average closing bid price per shares for the five consecutive trading days immediately preceding the date that YP Holdings notifies the Company that it wishes to convert some or all of its Series C preferred shares into common shares. The reset shall not be available if the proceeds of the sale of converted common shares equals or exceeds $750,000. Should proceeds of the sale of converted common shares equal or exceed $1,000,000, any unconverted Series C preferred shares shall be returned to the Company for retirement. Converted common shares are subject to a leak-out agreement, and no more than 50,000 common shares may be sold by YP Holdings in any one month.

Holders of Series C preferred shares are entitled to receive a preferred return equal to 10% of the gross cash sales income received in the ordinary course of business. Holders are not entitled to preemptive rights to purchase shares in future offerings of the Company.

Holders of Series C preferred shares have the right to register their unregistered shares when either the Company or another investor initiates a registration of the Company’s securities. Holders have the rights of co-sale, and are not required to sell all of their Series C preferred shares on the same terms or conditions of a co-sale by a majority shareholder. If any Series C preferred shareholder wishes to sell, transfer, or otherwise dispose of any or all of their Series C preferred shares, other Series C preferred shareholders shall not have a prior right to buy such shares.

Series D Preferred Stock

Series D preferred shares have a par value of $0.0001, and are convertible into common shares at a conversion rate of $1.00 per common share. Series D preferred shares rank senior to common shares and the Series B preferred shares. In the event of any liquidation, dissolution, or winding up of the Company, holders of Series D preferred shares shall be entitled to receive a preferred return equal to the purchase price paid for such Series D preferred shares after payment of the preferred returns relating to the Series A and C preferred shares. Series D preferred shares are not entitled to voting rights.

Holders of Series D preferred shares shall be entitled to receive a preferred return equal to 10% of the Gross Cash Sales Income received in the ordinary course of business. Upon issue of the dividend, the value of such shares shall be deemed to be retired. Holders of Series D preferred shares are not entitled to preemptive rights to purchase stock in future offerings of the Company. Holders of Series D preferred shares have the right to register their unregistered stock when either the Company or another investor initiates a registration of the Company’s securities. Holders of Series D preferred shares have the right of co-sale, but they are not required to sell all of their Series D preferred shares on the same terms or conditions of a co-sale by a majority shareholder.

As at February 28, 2018, Phoenix Bio Pharmaceuticals Corporation held 2,000,000 Series B Preferred Shares. On September 21, 2018, the Company announced it had obtained consent from the holder, Phoenix Bio Pharmaceuticals Corporation for the cancellation of 2,000,000 Preferred Series B shares in the Company in connection with the restructure of the Company and merger with Phoenix Life Sciences International Limited, a Canadian Corporation therefore there were no Series B Preferred Shares on issue at November 30, 2018.

As at February 28, 2018 and November 30, 2018 YP Holdings LLC had been issued 1,000,000 Series C Preferred Shares, but had converted 4,400 into common shares and therefore held 995,600 Series C Preferred Shares. However subsequently agreement was reached to cancel all outstanding Series C Preferred Shares.

Phoenix Life Sciences International Limited. 10-Q