6. Stockholders Deficit

9 Months Ended

Mar. 31, 2018

6.	Stockholders’ Deficit

Preferred Stock

As of March 31, 2018, the Company has 100,000,000 preferred shares authorized, having a par value of $.001 per share.

Of the preferred shares authorized, 5,000,000 have been designated as Series A preferred shares, 15,000,000 have been designated as Series B preferred shares, and 40,000,000 have been designated as Series C preferred shares. The rights and privileges of the Series A shares consist of super voting rights at 200 votes per share held, conversion rights on a one-to-one basis with common stock, and a liquidation preference as described below. The rights and privileges of the Series B shares consist of voting rights equal to one vote per share held, conversion rights equal to Series A and a liquidation preference as described below. The Series C shares are entitled to one vote per share held, will pay no dividend, are each convertible into four (4) shares of common stock, and have a liquidation preference junior to the Series A and B Preferred Stock. No Series C shares had been issued as of March 31, 2018.

Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any common stock or Series B and Series C preferred stock liquidation preference, the holders of the Series A preferred stock shall be entitled to be paid out of the assets of the Company an amount per share of Series A Preferred Stock equal to the product of (i) the original amount paid by the holder thereof for each share of Series A Preferred Stock owned by such holder as of the effective date of such liquidation, multiplied by (ii) the number of shares of Series A Preferred Stock owned of record by such holder as of the liquidation date (as adjusted for any combinations, splits, recapitalization and the like with respect to such shares). Series B preferred stock is next in liquidation preference after the Series A preferred stock, and is computed consistently with the formula above for the Series A preferred stock. Series C preferred stock is next in liquidation preference after the Series B preferred stock, and is computed consistently with the formula above for the Series A preferred stock.

On August 12, 2017, the Company issued 2,000,000 shares of Series B Preferred stock to a convertible note holder for his continuing financial support. As previously noted, Series B Preferred stock is convertible into equal shares of common stock. The Company estimates, as of the date of issuance, the 2 million shares of Series B Preferred stock had a market value of $1,800.

Common Stock

The Company increased its authorized number of shares of common stock available for future issuance in October, 2017, in order to have shares available for a variety of corporate purposes including the conversion to common stock of outstanding convertible notes. The Company’s Articles of Incorporation previously authorized it to issue up to 500,000,000 shares of common stock, par value $.001 per share. In October 2017, the Company increased the authorized shares of its common stock to 2 billion.

Effective December 2, 2017, the Company and an unrelated third party investor group entered into an “Equity Purchase Agreement” to provide the Company with potential stock based financing. The Equity Purchase Agreement provides for the investor group to purchase up to $5 million of the Company’s common stock, with the actual amount required to be purchased by the investor dependent upon the closing price of the Company’s common stock on the date that equity advances are requested. The Company may draw on the facility from time to time, as and when it determines appropriate in accordance with the terms and conditions of the Equity Purchase Agreement. Pursuant to the Equity Purchase Agreement the Company is obligated to register with the SEC shares of its common stock sufficient to accommodate the purchase by the investor. On January 31, 2018 and February 15, 2018, the Company filed amendments to its S-1 registration statement originally filed on January 4, 2018, to register a maximum of 500,000,000 shares of common stock for use under the Equity Purchase Agreement. At the closing price of our common stock at the filing date for this Form 10-Q of $0.0027 per share on the Pink Sheets, the maximum draw available under the Equity Purchase Agreement was $1,350,000. None of the advances under the Equity Purchase Agreement are available until such time as the United States Securities and Exchange Commission declares the S-1 registration statement effective, which has not occurred at the time of filing of this Form 10-Q, and which is generally outside the control of the Company.

Warrants

All 680,000 warrants outstanding as of June 30, 2017 expired unexercised as of July 31, 2017.

Consorteum Holdings, Inc. 10-Q