NOTE E - SERIES A CONVERTIBLE PREFERRED STOCK

12 Months Ended

Dec. 31, 2023

Notes

NOTE E - SERIES A CONVERTIBLE PREFERRED STOCK

NOTE E – SERIES A CONVERTIBLE PREFERRED STOCK

The holders of shares of the Series A convertible preferred stock (the “Series A Preferred”) are entitled to receive, when and as declared by our board of directors, dividends in cash in the amount of nine cents per share per annum through December 31, 2021, ten cents per share per annum through December 31, 2022, eleven cents per share per annum through December 31, 2023, and twelve cents per share per annum thereafter, payable within 90 days following the 31st day of December each year on such date as determined by the board of directors. The dividends are cumulative and beginning January 1, 2017, our board of directors may elect to make any required dividend payment with our unregistered common stock in lieu of cash.

Due to the unstated dividend cost arising from the gradually increasing dividends on the Series A Preferred, we calculated a discount on the Series A Preferred at the time of issuance as the present value of the difference between (i) the dividends that are payable in the periods preceding commencement of the perpetual twelve cents per share per annum dividend; and (ii) the perpetual twelve cents per share per annum dividend for a corresponding number of periods; discounted at the market rate of 12% totaling $309,337. The Series A Preferred was valued at the market price on the respective date of issuance for a total value of $672,472. The discount was amortized over the periods preceding commencement of the perpetual dividend, by charging imputed dividend cost against retained earnings and increasing the carrying amount of the Series A Preferred by a corresponding amount. The discount was fully amortized in 2022 with amortization of $2,431 for the year ended December 31, 2022. The discount amortization per share for the year 2022 was $0.01.

The Series A Preferred was originally issued as non-voting and provided that in the event that we failed, for any reason, to make a dividend payment as set forth above, then each share of the Series A Preferred shall thereafter be entitled to two votes upon any matter that the holders of our common stock are entitled to vote upon.

The Series A Preferred may be redeemed at the option of our board of directors for one dollar per share plus all accrued and unpaid dividends thereon at the date of redemption. In addition, at any time after a change of our control, the holders of the Series A Preferred shall have the right, at the election of a majority of the holders, to require us to redeem all of the Series A Preferred for one dollar per share plus all accrued and unpaid dividends thereon at the date of redemption.

The Series A Preferred has a liquidation preference of one dollar per share plus all accrued and unpaid dividends thereon in the event of our liquidation, dissolution or winding up.

We analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity.

We analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted none.

On December 27, 2023, our board of directors declared a dividend on the Series A Preferred after making the determination that, among other things, on a consolidated basis that (a) our net income for the year ended December 31, 2022 and net income projected for the year ended December 31, 2023, was legally sufficient to pay the dividends declared below on our Series A Preferred, and (b) the declaration of the dividend was not likely to render us unable to meet, as they mature, those liabilities for which payment has not been otherwise adequately provided.

These dividends were paid on January 3, 2024, out of our net income for the year ended December 31, 2022, to the holders of record of the issued and outstanding shares of our Series A Preferred at the close of business on December 30, 2023. The dividend consisted of $0.11 per share, representing the cumulative unpaid dividends on the Series A Preferred through the year ended December 31, 2023, for a total dividend payment of $68,008.

On December 23, 2022, our board of directors declared a dividend on the Series A Preferred after making the determination that, among other things, on a consolidated basis that (a) our net income for the year ended December 31, 2021 and net income projected for the year ended December 31, 2022, was legally sufficient to pay the dividends declared below on our Series A Preferred, and (b) the declaration of the dividend was not likely to render us unable to meet, as they mature, those liabilities for which payment has not been otherwise adequately provided.

These dividends were paid on January 3, 2023, out of our net income for the years ended December 31, 2021, to the holders of record of the issued and outstanding shares of our Series A Preferred at the close of business on December 21, 2022. The dividend consisted of $0.10 per share, representing the cumulative unpaid dividends on the Series A Preferred through the year ended December 31, 2022, for a total dividend payment of $61,826.

As of December 31, 2023, there were 618,257 shares of Series A Preferred outstanding with voting power representing 5.9% of the total voting power of our outstanding stock.