| Shareholders' (Deficit) Equity | Common
Stock On
December 13, 2010 (the Closing), the Company was party to an Assignment and Contribution Agreement (the Agreement).
Pursuant to the terms of Agreement, the members of Equitas Asset Management, LLC, (EAM), a non Halo entity, which
owned 100% of the interests of Equitas Housing Fund, LLC (EHF), assigned and contributed 100% of the interests of
EAM to HAM (a Halo subsidiary) in exchange for shares of 21,200,000 shares of the Companys Common Stock, $0.001 par value,
of the Company. The Agreement did not constitute a business combination. The
Company issued 7,500,000 shares of Halo common stock in exchange for $3,000,000 in debt or equity capital. The aggregate of 7,500,000
shares of Halo common stock will be subject to clawback (and cancellation) by Halo in the event that EAM does not generate at
least three million dollars ($3,000,000) in new capital to Halo within twelve months following the closing. Halo shall have the
right to claw back 2.5 shares of Halo common stock for every dollar not raised within the twelve months. Any cash generated by
EAM will need to be designated for use in Halos general operations and not that of the EHF business to release the clawback
rights. The
Company issued 13,700,000 shares of Halo common stock for the purchase of intangible assets owned by EAM which included trade
secrets and business processes used in the EHF business. The aggregate 13,700,000 shares of Halo common stock shall be subject
to clawback (and cancellation) by Halo in the event that EAM fails to generate at least $10,000,000 of net operating cash flows
from the EHF business within twenty-four months following the closing. Halo shall have the right to claw back 1.37 shares of Halo
common for every dollar not generated from the net operating cash flows of the EHF business. Once the $10,000,000 in net operating
cash flows from the EHF business is generated, the clawback rights will be released. In
applying the guidance of ASC 505 Equity to the above transactions, the clawback provisions create a performance
commitment that has not been met. As such, although the transaction did provide for a grant date at which time the equity shares
are issued and outstanding, the equity shares have not met the measurement date requirements required by ASC 505. Accordingly,
the par value of the shares issued and outstanding have been recorded at the grant date and as the clawback rights are released
and the measurement dates established, the fair value of the transactions will be determined and recorded. The pro-rata fair value
of equity issued in connection with fund raising efforts at each measurement date will be recorded as debt issuance costs or a
reduction in the equity proceeds raised by the counter party. The pro-rata fair value of equity issued in connection with the
purchase of intangible assets at the measurement date will be recorded as amortization expense because the amortization period
of the underlining asset purchase and the clawback release rights are commensurate. As
mentioned above, the Agreement provides for clawback provisions, pursuant to which all of the shares of Halo Common
Stock issued to the member of EAM are subject to forfeiture in the event certain financial metrics are not timely achieved. The
financial metrics call for significant cash generation by EHF within the first 12 months, and within the first 24 months following
the closing date. We refer you to Section 2(b)(i) and (ii) of the Agreement, for the specifics of the clawback provisions. As
of December 31, 2012, no cash was generated by EHF. The times to meet both the 12 month and 24 month financial metrics have lapsed
and the metrics have not been met. Based upon the events that have transpired, and the lack of progress toward the financial metrics,
the Company demanded that the recipients of the shares of Halo Common Stock give effect to both clawback provisions and immediately
forfeit back all of the Halo shares issued to such recipients an aggregate of 21,200,000 shares. Additionally, the Company
has instructed the Companys transfer agent to cancel all of the shares of Company Common Stock issued pursuant to the Agreement.
As of December 31, 2014, the Companys transfer agent had refused to cancel the shares without either (i) presentation of
the physical certificates to the transfer agent, or (ii) a court order requiring the transfer agent to cancel. During
March 2015, the Company entered into a $250,000 compromise and settlement agreement with the court appointed receivership holding
17,808,000 shares of the Companys 21,200,000 common stock noted above. The physical stock certificate was sent to the Companys
transfer agent to immediately cancel those respective outstanding shares of that Agreement. Upon receipt by the transfer agent
of the stock certificates noted above, the transfer agent did cancel the respective 21,200,000 shares of common stock. An additional
1,272,000 shares of the companys common stock, all subject to the clawback provisions of the Agreement have also been sent
to the Companys transfer agent to immediately cancel those respective common shares of that Agreement but as of the time
of this filing those shares have not yet been canceled. Some of the shares were returned to the Company by the Transfer Agent
requiring a medallion guarantee. The Company expects to have these shares cancelled sometime in 2016. Secondarily, the Company
is actively pursuing the procurement of an additional physical certificate from a respective individual still in possession of
the common stock certificate. As of the time of these consolidated financials 3,392,000 of the 21,200,000 shares issued as part
of the Agreement remain outstanding. The
Companys total common shares outstanding totaled 48,562,750 at March 31, 2016. Preferred
Stock In
connection with the merger, the Company authorized 1,000,000 shares of Series Z Convertible Preferred Stock with a par value of
$0.01 per share (the Series Z Convertible Preferred). The number of shares of
Series Z Preferred Stock may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number
of Series Z Preferred Shares to less than the number of shares then issued and outstanding. In the event any Series
Z Preferred Shares shall be converted, (i) the Series Z Preferred Shares so converted shall be retired and cancelled and shall
not be reissued and (ii) the authorized number of Series Z Preferred Shares set forth in this section shall be automatically reduced
by the number of Series Z Preferred Shares so converted and the number of shares of the Corporations undesignated Preferred
Stock shall be deemed increased by such number. The Series Z Convertible Preferred is convertible into common shares at the rate
of 45 shares of common per one share of Series Z Convertible Preferred. The Series Z Convertible Preferred has liquidation and
other rights in preference to all other equity instruments. Simultaneously upon conversion of the remaining Series A Preferred,
Series B Preferred, and Series C Preferred and exercise of any outstanding stock options issued under the HGI 2007 Stock Plan
into Series Z Convertible Preferred, they will automatically, without any action on the part of the holders, be converted into
common shares of the Company. Since the merger, in connection with the exercise of stock options into common stock and converted
Series A Preferred, Series B Preferred and Series C Preferred as noted above, 82,508 shares of
Series Z Convertible Preferred were automatically authorized and converted into shares of the Companys common stock leaving
917,492 shares of authorized undesignated Preferred Stock in the Company in accordance with the Series Z Convertible Preferred
certificate of designation. The
Company authorized 175,000 shares of Series X Convertible Preferred Stock with a par value of $0.01 per share (the Series
X Preferred). The number of shares of Series X Preferred may be decreased by resolution of the Board; provided, however,
that no decrease shall reduce the number of Series X Preferred to less than the number of shares then issued and outstanding.
In the event any Series X Preferred Shares shall be redeemed, (i) the Series X Preferred so redeemed shall be retired and cancelled
and shall not be reissued and (ii) the authorized number of Series X Preferred Shares set forth in this section shall be automatically
reduced by the number of Series X Preferred Shares so redeemed and the number of shares of the Corporation's undesignated Preferred
Stock shall be deemed increased by such number. The Series X Preferred Shares rank senior to the Companys common stock
to the extent of $10.00 per Series X Preferred Shares and on a parity with the Companys common stock as to amounts in excess
thereof. The holders of Series X Preferred shall not have voting rights. Holders of the Series X Preferred shall be entitled to
receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash when declared by the
board. Holders of Series X Preferred have a liquidation preference per share equal to $10.00. During March 2015, as part of the
$250,000 compromise and settlement agreement with the court appointed receivership discussed above, the settlement agreement calls
for a relinquishment and abandonment of any and all claims against Halo on 90,000 shares of the Companys Series X Preferred
stock belonging to the receivership. The liquidation preference was $536,770 as of March 31, 2015. During December 2015, the Company
exercised its redemption right and redeemed the remaining issued and outstanding 53,677 shares in exchange for promissory notes.
As such, as of March 31, 2016, there were no shares authorized, issued or outstanding. In
April 2012, the Company authorized 100,000 shares of Series E Convertible Preferred Stock (the Series E Preferred)
with a par value of $0.001 per share, at ten dollars ($10.00) per share with a conversion rate of fifty (50) shares of the Companys
common stock for one share of Series E Preferred. The number of shares of Series E Preferred may be decreased by resolution of
the Board; provided, however, that no decrease shall reduce the number of Series E Preferred to less than the number of shares
then issued and outstanding. In the event any Series E Preferred Shares shall be converted, (i) the Series E Preferred so converted
shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series E Preferred Shares set forth
shall be automatically reduced by the number of Series E Preferred Shares so converted and the number of shares of the Corporation's
undesignated Preferred Stock shall be deemed increased by such number. The Series E Preferred Shares rank senior to the Companys
common stock to the extent of $10.00 per Series E Preferred Shares and on a parity with the Companys common stock as to
amounts in excess thereof. The holders of Series E Preferred shall not have voting rights. Holders of the Series E Preferred shall
be entitled to receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash or common
stock when declared by the board. Holders of Series E Preferred have a liquidation preference per share equal to $10.00. The liquidation
preference was $700,000 as of March 31, 2015. Each share of Series E Preferred, if not previously converted by the holder, will
automatically be converted into common stock at the then applicable conversion rate after thirty-six months from the date of purchase.
As of March 31, 2016, there were 70,000 shares issued and outstanding with total cash consideration of $700,000, convertible into
3,500,000 shares of the Companys common stock. The
HGI Series A Convertible Preferred Stock (the Series A Preferred) has a par value of $0.001 per share and has a
liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid
dividends, if any or (b) the per share amount the holders of the Series A Preferred would be entitled to upon conversion, as defined
in the Series A Preferred certificate of designation. The liquidation preference was $788,572, of which $229,074 is an accrued
(but undeclared) dividend as of March 31, 2016. Holders of the Series A Preferred are entitled to receive, if declared by the
board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series A Preferred is convertible
into the Companys common stock at a conversion price of $1.25 per share. The Series A Preferred is convertible, either
at the option of the holder or the Company, into shares of the Companys Series Z Convertible Preferred Stock, and immediately,
without any action on the part of the holder, converted into common stock of the Company. The Series A Preferred is redeemable
at the option of the Company at $1.80 per share prior to conversion. As of March 31, 2016, there have been 127,001 shares of Series
A Preferred converted or redeemed. The Series A Preferred does not have voting rights. The Series A Preferred ranks senior to
the following capital stock of the Company: (a) Series B Preferred, and (b) Series C Preferred. The
HGI Series B Convertible Preferred Stock (the Series B Preferred) has a par value of $0.001 per share and has a
liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid
dividends, if any or (b) the per share amount the holders of the Series B Preferred would be entitled to upon conversion. The
liquidation preference was $647,767, of which $187,855 is an accrued (but undeclared) dividend as of March 31, 2016. Holders of
the Series B Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash
or common stock of the Company. The Series B Preferred is convertible into the Companys common stock at a conversion price
of $1.74 per share. The Series B Preferred is convertible, either at the option of the holder or the Company, into shares of the
Companys Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted
into common stock of the Company. The Series B Preferred is redeemable at the option of the Company at $2.30 per share prior to
conversion. As of March 31, 2016, there have been 270,044 shares of Series B Preferred converted or redeemed. The Series B Preferred
does not have voting rights. Series B Preferred ranks senior to the following capital stock of the Company: the Series C Preferred. The
HGI Series C Convertible Preferred Stock (the Series C Preferred) has a par value of $0.001 per share and has a
liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid
dividends, if any or (b) the per share amount the holders of the Series C Preferred would be entitled to upon conversion. The
liquidation preference was $436,702, of which $126,702 is an accrued (but undeclared) dividend as of March 31, 2016. Holders of
the Series C Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash
or common stock of the Company. The Series C Preferred is convertible into the Companys common stock at an initial conversion
price of $2.27 per share. The Series C Preferred is convertible, either at the option of the holder or the Company, into shares
of the Companys Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted
into common stock of the Company. The Series C Preferred is redeemable at the option of the Company at $2.75 per share prior to
conversion. As of March 31, 2016, there have been 28,000 shares of Series C Preferred converted or redeemed. The Series C Preferred
does not have voting rights. Series C Preferred ranks senior to the following capital stock of the Company: None. The
Company had issued and outstanding at March 31, 2016 372,999
shares of Series A Preferred, 229,956 shares of Series B Preferred, and 124,000 shares of Series C Preferred, all with a par value
of $0.001. |
