Note 5. Convertible Preferred Stock

9 Months Ended

Sep. 30, 2011

Preferred Stock [Text Block]

5. Convertible Preferred Stock.  The shareholders have authorized 10,000,000 shares of preferred stock for issuance. The Board of directors authorized the issuance of up to 10,000 shares of Series 2010-A 10% Convertible Preferred Stock on July 29, 2010.  Each preferred share is convertible into 1,000 common shares ($100 stated value per share divided by $0.10).  Dividends are payable quarterly at 10% per annum in cash or stock at the option of the preferred Stock Holder.  Stock dividend payments are valued at the higher of $0.10 per share of common stock or the average of the two highest volume weighted average closing prices for the 5 consecutive trading days ending on the trading day that is immediately prior to the dividend payment date.  During the first quarter of 2011, a total of 200 shares of Series 2010-A 10% Convertible Preferred Stock were issued.  Net proceeds totaled $18,000 after $2,000 of brokerage commissions.  The preferred stock is convertible into 200,000 shares of restricted common stock.

The Company accrued $4,206 of preferred stock dividends during the first quarter, $4,250 during the second quarter and $4,250 during the third quarter of 2011.