PREFERRED DIVIDENDS

3 Months Ended

Dec. 31, 2012

Preferred Dividends

Note 10 - PREFERRED DIVIDENDS

Holders of Series A Preferred are entitled to a 5.00% annual dividend payable quarterly in either cash or additional Series A Preferred at the option of the Company with fractional shares paid in cash.  Holders of Series B Preferred are entitled to a 12.00% annual dividend payable quarterly in cash.

The Dividend Rate with respect the Series A Preferred increased to 10% per annum for the quarter ended December 31, 2012 since the average closing price of the Company’s common stock during the last thirty (30) trading days of the quarter was less than $3.00 per share (a “Dividend Adjustment”).  A holder of Series A Preferred has notified the Company that a Dividend Adjustment was required as a result of the average closing price of the Company’s common stock for the thirty-day period ended March 31, 2012, and subsequent quarters.  Management disagrees with the method of calculation used by the holder and believes that the Company’s calculation determining that a Dividend Adjustment was not required during the quarters ended March 31 and September 30, 2012 is reasonable, and that an ultimate determination that an alternative method should be employed is doubtful.  The pro-forma effect of a Dividend Adjustment for the six months ended December 31, 2012 is shown in the table below: 

	Six Months Ended December 31, 2012						Variance
	As Reported			Pro-forma			Dollars			Percent
Dividends on Series A Preferred		$	252,123		$	342,816		$	90,693		36.0	%
Net loss applicable to common shareholders		$	(358,749)		$	(449,442)		$	(90,693)		25.4	%
Basic and diluted loss per share		$	(0.03)		$	(0.04)		$	(0.01)		25.4	%