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Note 13 - Shareholders' Equity
12 Months Ended
May 31, 2012
Stockholders' Equity Note Disclosure [Text Block]
13.           SHAREHOLDERS’ EQUITY

Terms of Series A Preferred Stock (“Preferred Stock”)

The Preferred Stock is convertible at $.30 per share into $.001 par value Common Stock of Company, (equaling 60% of the issued and outstanding Common Stock of the Company on a fully diluted basis, excluding the Management Stock Option (see below)).  Initially, dividends were to be paid (a) at an annual rate of 12% in each of the first three years ending August 14, 2008, 2009, and 2010 and were to be paid in preferred shares and (b) after the first three years, at a rate of 12% if paid in cash or at a rate of 15% if paid in preferred shares, at the election of the Company.  In February 2010, the preferred shareholders voted to terminate the issuance of dividends effective November 30, 2009.  The preferred share dividends shall convert into Common Stock at $.30 per share.

So long as over $1,500,000 of the Preferred Stock is issued and outstanding the Company shall require the prior written consent of Holders representing 2/3 of the Preferred Stock issued and outstanding to (a) sell, merge with, acquire or consolidate with another business entity, (b) incur additional leverage beyond the leverage contemplated by the Company and Holders as part of the Company’s acquisition of Artisanal Cheese, LLC, or (c) issue any new shares of common stock or securities convertible or exercisable into Common Stock in excess of 2% of the shares of Common Stock issued and outstanding on a fully diluted basis at the Closing, excluding the Management Stock Option below.

In the event of a liquidation, the Preferred Stockholders shall receive a cash payment of $1.20 per preferred share.

Preferred Stock Issuances

During the quarter ended August 31, 2011, several private investors made equity investments totaling $430,250 for which these investors received 430,250 shares of our  preferred stock.

During the quarter ended August 31, 2011, we  issued a secured lender 277,544 shares of our  preferred stock in lieu of a cash payment of interest owed on his loan totaling $277,544.

In August 2011, Artisanal issued 50,000 shares of preferred stock to a lender in connection with a loan to us of $200,000.

During the quarter ended November 30, 2011, one private investor made an investment of $370,000 for which he received 370,000 shares of our  preferred stock.

As of May 31, 2012, the total number of preferred shares outstanding is 6,514,154.

Common Stock Issuances

In March 2011, a preferred shareholder converted 13,500 shares of preferred stock at the conversion price of $.30 per share into 45,000 shares of common stock.

In July 2010, the Company issued 50,000 shares of common stock to each of seven directors for a total of 350,000 shares for their agreement to serve as board members.  The company recorded an expense of $24,200 in connection with these shares over a one year amortization period.

In October, 2010, the Company issued a total of 65,000 shares of common stock to two employees. The company has record an expense of $38,786 in connection with these shares over a one year amortization period.

In December 2010, 25,000 shares of common stock previously issued to an employee were cancelled.

In March 2011, a preferred shareholder converted 13,500 shares of preferred stock at the conversion rate of $.30 per share for which the shareholder received 45,000 shares of common stock.

In September 2011, two preferred shareholders converted a total of 263,300 shares of preferred stock at the conversion rate of $.30 per share for which they received a total of 877,666 shares of common stock.

In October 2011, we issued a total of 155,000 shares of common stock to three employees. We  recorded an expense of $75,950 in connection with these shares over a one year amortization period.

In February 2012, a preferred shareholder converted a total of 756,000 shares of preferred stock at the conversion rate of $.30 per share for which he received a total of 2,520,000 shares of common stock.

In the quarter ended May 31, 2012, Artisanal issued 341,000 shares of common stock to lenders in connection with loans totaling $682,000.

As of May 31, 2012, the total number of common shares outstanding is 28,093,982.

Stock Option

On or about February 11, 2011, Artisanal entered a marketing and distribution agreement with KeHE Distributors pursuant to which we were obligated to issue up to 4,880,000 stock options in specified tranches subject to KeHE achieving certain purchase thresholds.  During May 2011, we amended the vesting terms of these options, whereby 440,000 of the options were immediately vested and the remainder vested after our fiscal year end. The respective stock options have an exercise period of three years from the date of issuance and an exercise price of $.30 per share.

In September 2011, we issued a total of 550,000 stock options to five board members to replace those options which expired earlier in the year.  The stock options have an exercise period of three years from the date of issuance and an exercise price of $.30 per share.  We have recorded an expense of $20,420 in connection with these options.

A summary of the activity of stock options for the years ended May 31, 2012 and 2011 is as follows:

   
Stock Options
   
Weighted Average
Exercise Price
 
   
Outstanding
   
Exercisable
   
Outstanding
   
Exercisable
 
Balance – May 31, 2010
    770,000       770,000     $ .30     $ .30  
Granted Fiscal Year 2011
    4,880,000       4,880,000       .30       .30  
Exercised Fiscal Year 2011
    -       -       -       -  
Canceled Fiscal Year 2011
    (770,000 )     (770,000 )     (.30 )     (.30 )
Balance – May 31, 2011
    4,880,000       4,880,000       .30       .30  
Granted Fiscal Year 2012
    550,000       550,000       .30       .30  
Exercised Fiscal Year 2012
    -       -       -       -  
Canceled Fiscal Year 2012
    -       -       -       -  
Balance – May 31, 2012
    5,430,000       5,430,000     $ .30     $ .30  

The intrinsic value of the Company’s options outstanding during the years ended May 31, 2012 and 2011 was $0 and $0, respectively.

Information, at date of issuance, regarding stock option grants for the year ended May 31, 2012:

 
 
Shares
   
Weighted
Average
Exercise
 Price
   
Weighted
Average
Fair
Value
 
Year ended May 31, 2012:
                 
Exercise price exceeds market price
    5,430,000     $ .30     $ .065  
Exercise price equals market price
    -       -       -  
Exercise price is less than market price
    -       -       -  
                         

The following table summarizes information about stock options outstanding and exercisable at May 31, 2012:

 
Number
Outstanding
   
Weighted-
Average
Remaining
Life in
Years
   
Weighted
Average
Exercise
Price
   
Number
Exercisable
 
Range of exercise prices:
                     
$ .01 to $.50       5,430,000       3     $ .30       5,430,000