Earning (Loss) Per Share

9 Months Ended

Sep. 30, 2011

Note 6 – Earning (Loss) Per Share

The Company is required, in periods in which it has net income, to calculate basic earnings per share (“basic EPS”) using the two-class method. The two-class method is required because the Company’s Class N preferred shares, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. Under the two-class method, earnings for the period, net of any deductions for contractual preferred stock dividends and any earnings actually distributed during the period, are allocated on a pro-rata basis to the common and preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares.

In periods in which the Company has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The two-class method is not used, because the preferred stock does not participate in losses.

Options, warrants and convertible debt are included in the calculation of diluted earnings per share, since the instruments are assumed to be exercised or converted, except when their effect would be anti-dilutive. For the three months ended September 30, 2011, the effect of including the Company’s potential common shares had no effect on basic EPS per common share, and reduced basic EPS per preferred share by $0.01. For the nine months ended September 30, 2011, the effect of including the Company’s potential common shares had no effect on basic EPS per common share, and reduced basic EPS per preferred share by $0.07. For the three and nine months ended September 30, 2010, the net effect of including the Company’s potential common shares did not change the EPS amount, and therefore diluted EPS equals basic EPS.

Potential common shares that were not included in the computation of earnings (loss) per share because they would have been anti-dilutive are as follows:

	September 30,
	2011		2010

Assumed exercise of options to purchase shares of common stock		66,350		648,246