Entertainment Arts Research Inc. (OTCPK:EARI) announced a private placement of 2,000,000 series A preferred stock at $1 per preferred share for gross proceeds of $2,000,000 on February 7, 2013.The company will issue securities pursuant to exemption provided under Regulation D and Regulation S. The company will initially issue shares worth $1,150,000 in the first tranche and further two tranches for an additional $850,000. The company expects to close first tranche as of February 28, 2013. The company will issue the securities to accredited investors.

The preferred share carry a coupon rate of 7%, to be payable quarterly, at the rate of $0.07 per share. Each preferred share is convertible into 7.5 shares of the common stock of the company, an approximate conversion price of $0.133 per share. The preferred shares are convertible into 15,000,000 shares or 20.07% of the shares, of the common stock to be issued upon conversion of the preferred shares.

The company may also reserve additional shares to be issued upon conversion. The company may avail services of one or more placement agents for the transaction. The company may pay cash commission of up to 7% of the gross proceeds of the transaction and a non-accountable expense allowance, and blue sky related costs.

The company announced that $425,000 will raised in the second tranche only upon the bona fide sale by the company or its subsidiaries, or manufacturing of finished goods of an amount greater than $500,000 to a third party purchaser and $425,000 will be raised in the third tranche upon roll out of a robust retail web portal that can support the general public and a minimum of 200 retail customers for use for development or acquisition of additional intellectual property, prototype development.