This excerpt taken from the WRES 10-Q filed Aug 3, 2007.
NOTE DCHANGES IN STOCKHOLDERS EQUITY
During the six months ended June 30, 2007, holders of 564 shares of convertible preferred stock converted into common stock on a basis of 0.50 shares of common stock for one share of convertible preferred stock. As of June 30, 2007, 271,436 shares of convertible preferred stock remain outstanding. Preferred dividends of approximately $130,000 were accrued at June 30, 2007.
The preferred stock pays an 8% cumulative dividend and is treated as a deduction in additional paid in capital. The holders of the preferred stock are not entitled to vote except as defined by the agreement or as provided by applicable law. The preferred stock may be voluntarily converted, at the election of the holder into common stock of the Company based on a conversion rate of 1 to 0.50.
Additionally, commencing seven years after the date of issuance (October 1, 2009), holders of the preferred stock may elect to require the Company to redeem their preferred stock at a redemption price equal to the liquidation value of $12.00 per share, plus accrued but unpaid dividends, if any (Redemption Price). Upon the receipt of a redemption election, the Company, at its option, shall either: (1) pay the holder cash in the amount equal to the Redemption Price or (2) issue to holder shares of common stock in an amount equal to 125% of the redemption price and any accrued and unpaid dividends, based on the weighted average closing bid price of the Companys common stock for the thirty trading days immediately preceding the date of the written redemption election by the holder up to a maximum of 1.5 shares of common stock for each one share of preferred stock redeemed. The Company is accreting the carrying value of its preferred stock to its redemption price using the effective interest method with changes recorded to additional paid in capital. The accretion of preferred stock results in a reduction of earnings per share applicable to common stockholders.
Notwithstanding the forgoing, if the closing bid price of the Companys publicly traded common stock as reported by the NASDAQ stock market, or any exchange on which the shares of common stock are traded, exceeds 133% of the conversion price then in effect for the convertible preferred shares for at least 10 days during any 30-day trading period, the Company has the right to redeem in whole or in part the convertible preferred stock at a redemption price of $12 per share (plus any accrued unpaid dividends) or convert the convertible preferred shares (plus any accrued unpaid dividends) into common stock at the then applicable conversion rate.
At June 30, 2007, there were 271,436 preferred shares outstanding that the Company may be required to redeem at the aggregate redemption price of $3,257,232 beginning July 1, 2010. As noted above, the Company could, at its option, settle the redemption requests in shares of its common stock.
During the six months ended June 30, 2007, employees and directors exercised a total of 146,000 options at exercise prices between $4 and $9.05 per share. The Company received proceeds of approximately $0.7 million from these exercises.