Series A & A-1 Redeemable Convertible Preferred Stock	6 Months Ended
Jun. 30, 2015
Notes to Financial Statements
Note 7 - Series A & A-1 Redeemable Convertible Preferred Stock	The Board of Directors has designated 450,000 shares of redeemable convertible Series A par value $.001 preferred stock and 125,000 shares of redeemable convertible Series A-1 par value $.001 preferred stock. Each share of Series A and A-1 preferred stock shall has a liquidation preference equal to $6 per share plus any accrued or declared and unpaid dividends owed to holders of shares. In the event of a liquidation, winding up, or dissolution of the Company, no distribution shall be made to holders of shares of common stock ranking junior to Series A and A-1 preferred stock until holders of the Series A and A-1 preferred stock have received their liquidation preference. Series A and A-1 preferred stock rank equal with each other and the Series A-2 preferred stock (see Note 8) for all purposes. The holders of preferred stock have the right to one vote for each share of common stock into which such share of preferred stock could then be converted. In accordance with Series A and A-1 certificates of designation above, cumulative dividends on each share of Series A and A-1 preferred stock accrue at a rate of 10% of the $6 liquidation amount. After May 31, 2011, the dividend rate increased from 10% to 18%. Dividends are payable quarterly in cash when and if declared by the Board of Directors. The dividends accrue and accumulate whether or not they have been declared by the board of directors and whether or not there are profits or other funds legally available. In January 2014, the Company amended the certificate of designation of the Series A Preferred with the effect of satisfying cumulative unpaid dividends through September 30, 2013 with common stock at the rate of one common share per $0.65 of dividends, and reducing the dividend rate to 10% from 18% beginning October 1, 2013. As a result of the board of directors’ declaration of dividends in February 2014, $1,913,479 of cumulative dividends were satisfied by the issuance of 2,943,837 shares of common stock. These shares were issuable at June 30, 2014, and a portion of these shares have not been issued for administrative reasons. Accordingly, the presentation in these financial statements considers these shares as effectively issued. In May 2014, the Company amended the certificate of designation of the Series A-1 Preferred with the effect of satisfying cumulative unpaid dividends through December 31, 2013 with common stock at the rate of one common share per $0.65 of dividends, and reducing the dividend rate to 10% from 18% beginning January 1, 2014. As a result of the board of directors’ declaration of dividends in June 2014, $243,440 of cumulative dividends were satisfied with 374,523 shares of common stock. These shares were issuable at June 30, 2014, and a portion of them had not been issued for administrative reasons. Accordingly, the presentation in these financial statements considers these shares as effectively issued. During the three months ended June 30, 2015 and 2014, there were $117,929 and $65,516, respectively, of preferred stock dividends accumulated for Series A preferred stock. During the six months ended June 30, 2015 and 2014, there were $235,858 and $131,032, respectively, of preferred stock dividends accumulated for Series A preferred stock. At June 30, 2015 and December 31, 2014, there were cumulative unpaid dividends of $563,526 and $327,668, respectively, for Series A preferred stock. During the three months ended June 30, 2015 and 2014, there were $16,716 and $9,287 of preferred stock dividends accumulated for Series A-1 preferred stock respectively. During the six months ended June 30, 2015 and 2014, there were $33,431 and $18,573 of preferred stock dividends accumulated for Series A-1 preferred stock. At June 30, 2015 and December 31, 2014, there were cumulative unpaid dividends of $70,577 and $37,146, respectively, for Series A-1 preferred stock. Prior to the amendments described above, on or after April 30, 2012, a holder could have requested the Company to repurchase on the date which is 31 calendar days thereafter, all shares of Series A or A-1 preferred stock held by the holder for cash equal to $6 per share plus accrued and declared but unpaid dividends as of the repurchase date. The Company had the option whether or not to agree to the repurchase. If the Company had failed to repurchase the shares, the majority holders of Series A and A-1 stock would have had the right to elect the majority of the board of directors. No such holder at any time requested the Company repurchase all shares of Series A or A-1 preferred. Majority holders did not exercise the right to elect the majority of the board of directors. After giving effect to the aforementioned amendments, on or after May 31, 2015, a holder of the Series A or A-1 preferred stock can request the Company repurchase on the date which is 30 calendar days thereafter, all shares of Series A or A-1 preferred stock held by the holder for cash equal to $6 per share plus accrued and unpaid dividends as of the repurchase date. The Company has the option whether or not to agree to the repurchase. In the event the Company fails to repurchase, or, after December 31, 2014, payment of dividends on a series of preferred stock is four quarters in arrears, the dividend rate on that series will increase to 18% and the majority holders of said series together with holders of any series of equal seniority, will have the right to elect the majority of the board of directors until such failure or arrearage is cured. As of December 31, 2014 dividends on the Series A and A-1 were five and four quarters in arrears respectively, and at June 30, 2015, they were seven and six quarters in arrears, respectively. Further, at June 30, 2015 the Company had not agreed to repurchase the Series A or A-1 preferred stock. Accordingly the dividend rate on the Series A and A-1 preferred stock has increased to 18%. Under both the Series A and Series A-1 certificates of designation, the holder has the right, at any time, to convert each share of preferred stock into 3.75 (the conversion ratio) shares of common stock, or a conversion price of $1.60. The conversion ratio and price are subject to adjustment when the Company declares or pays dividends, makes a distribution on common stock payable in common shares, or affects a subdivision, split, consolidation, combination, or reverse split of outstanding common shares into a greater or lesser number of common shares. The Company, at its option, may require conversion of all or any pro-rata portion of shares of Series A or A-1 preferred stock outstanding into common stock at the conversion price if at any time i) the common stock is listed for trading on a national securities exchange, an inter-dealer automated quotation system, or over the counter bulletin board, ii) the Company shall have prepared and filed with the Securities and Exchange Commission a registration statement covering the shares of common stock to be issued upon due conversion of preferred stock, and such registration statement shall have been declared effective under the Securities Act of 1933, as amended, and continues to be effective, iii) during any preceding period of twenty consecutive trading days (while i) and ii) are fulfilled) the closing price equals or exceeds 150% of the conversion price, and iv) the Company is current on its dividends for that Series. Registration Rights - In connection with the Series A-1 preferred stock subscription agreements, the Company agreed to pay the various subscribers 1/2% of the aggregate purchase price of shares acquired each month beginning on various dates between December 1, 2009 and July 1, 2010 until i) the Company has prepared and filed a registration statement with the Securities and Exchange Commission which has been declared effective under the Securities Act or the holder is then able to sell the underlying common shares under Rule 144 promulgated pursuant to the Securities Act and ii) the Company has obtained a ticker symbol and common shares are eligible to trade on the Over the Counter Bulletin Board (OTCBB). In May 2015 the Company’s common shares became eligible to trade on the OTCBB. At June 30, 2015 and December 31, 2014, the estimated liability amounted to $127,241 and $122,549, respectively, and the resulting change for the three and six months ended June 30, 2015 amounting to $4,692, respectively, is included as other expense in the accompanying statements of operations. The arrangement provides for no limitation as to the maximum potential consideration to be transferred.

Series A & A-1 Redeemable Convertible Preferred Stock

6 Months Ended

Jun. 30, 2015

Note 7 - Series A & A-1 Redeemable Convertible Preferred Stock

The Board of Directors has designated 450,000 shares of redeemable convertible Series A par value $.001 preferred stock and 125,000 shares of redeemable convertible Series A-1 par value $.001 preferred stock. Each share of Series A and A-1 preferred stock shall has a liquidation preference equal to $6 per share plus any accrued or declared and unpaid dividends owed to holders of shares. In the event of a liquidation, winding up, or dissolution of the Company, no distribution shall be made to holders of shares of common stock ranking junior to Series A and A-1 preferred stock until holders of the Series A and A-1 preferred stock have received their liquidation preference. Series A and A-1 preferred stock rank equal with each other and the Series A-2 preferred stock (see Note 8) for all purposes.

The holders of preferred stock have the right to one vote for each share of common stock into which such share of preferred stock could then be converted.

In accordance with Series A and A-1 certificates of designation above, cumulative dividends on each share of Series A and A-1 preferred stock accrue at a rate of 10% of the $6 liquidation amount. After May 31, 2011, the dividend rate increased from 10% to 18%. Dividends are payable quarterly in cash when and if declared by the Board of Directors. The dividends accrue and accumulate whether or not they have been declared by the board of directors and whether or not there are profits or other funds legally available.

In January 2014, the Company amended the certificate of designation of the Series A Preferred with the effect of satisfying cumulative unpaid dividends through September 30, 2013 with common stock at the rate of one common share per $0.65 of dividends, and reducing the dividend rate to 10% from 18% beginning October 1, 2013. As a result of the board of directors’ declaration of dividends in February 2014, $1,913,479 of cumulative dividends were satisfied by the issuance of 2,943,837 shares of common stock. These shares were issuable at June 30, 2014, and a portion of these shares have not been issued for administrative reasons. Accordingly, the presentation in these financial statements considers these shares as effectively issued.

In May 2014, the Company amended the certificate of designation of the Series A-1 Preferred with the effect of satisfying cumulative unpaid dividends through December 31, 2013 with common stock at the rate of one common share per $0.65 of dividends, and reducing the dividend rate to 10% from 18% beginning January 1, 2014. As a result of the board of directors’ declaration of dividends in June 2014, $243,440 of cumulative dividends were satisfied with 374,523 shares of common stock. These shares were issuable at June 30, 2014, and a portion of them had not been issued for administrative reasons. Accordingly, the presentation in these financial statements considers these shares as effectively issued.

During the three months ended June 30, 2015 and 2014, there were $117,929 and $65,516, respectively, of preferred stock dividends accumulated for Series A preferred stock. During the six months ended June 30, 2015 and 2014, there were $235,858 and $131,032, respectively, of preferred stock dividends accumulated for Series A preferred stock. At June 30, 2015 and December 31, 2014, there were cumulative unpaid dividends of $563,526 and $327,668, respectively, for Series A preferred stock.

During the three months ended June 30, 2015 and 2014, there were $16,716 and $9,287 of preferred stock dividends accumulated for Series A-1 preferred stock respectively. During the six months ended June 30, 2015 and 2014, there were $33,431 and $18,573 of preferred stock dividends accumulated for Series A-1 preferred stock. At June 30, 2015 and December 31, 2014, there were cumulative unpaid dividends of $70,577 and $37,146, respectively, for Series A-1 preferred stock.

Prior to the amendments described above, on or after April 30, 2012, a holder could have requested the Company to repurchase on the date which is 31 calendar days thereafter, all shares of Series A or A-1 preferred stock held by the holder for cash equal to $6 per share plus accrued and declared but unpaid dividends as of the repurchase date. The Company had the option whether or not to agree to the repurchase. If the Company had failed to repurchase the shares, the majority holders of Series A and A-1 stock would have had the right to elect the majority of the board of directors. No such holder at any time requested the Company repurchase all shares of Series A or A-1 preferred. Majority holders did not exercise the right to elect the majority of the board of directors.

After giving effect to the aforementioned amendments, on or after May 31, 2015, a holder of the Series A or A-1 preferred stock can request the Company repurchase on the date which is 30 calendar days thereafter, all shares of Series A or A-1 preferred stock held by the holder for cash equal to $6 per share plus accrued and unpaid dividends as of the repurchase date. The Company has the option whether or not to agree to the repurchase. In the event the Company fails to repurchase, or, after December 31, 2014, payment of dividends on a series of preferred stock is four quarters in arrears, the dividend rate on that series will increase to 18% and the majority holders of said series together with holders of any series of equal seniority, will have the right to elect the majority of the board of directors until such failure or arrearage is cured. As of December 31, 2014 dividends on the Series A and A-1 were five and four quarters in arrears respectively, and at June 30, 2015, they were seven and six quarters in arrears, respectively. Further, at June 30, 2015 the Company had not agreed to repurchase the Series A or A-1 preferred stock. Accordingly the dividend rate on the Series A and A-1 preferred stock has increased to 18%.

Under both the Series A and Series A-1 certificates of designation, the holder has the right, at any time, to convert each share of preferred stock into 3.75 (the conversion ratio) shares of common stock, or a conversion price of $1.60. The conversion ratio and price are subject to adjustment when the Company declares or pays dividends, makes a distribution on common stock payable in common shares, or affects a subdivision, split, consolidation, combination, or reverse split of outstanding common shares into a greater or lesser number of common shares.

The Company, at its option, may require conversion of all or any pro-rata portion of shares of Series A or A-1 preferred stock outstanding into common stock at the conversion price if at any time i) the common stock is listed for trading on a national securities exchange, an inter-dealer automated quotation system, or over the counter bulletin board, ii) the Company shall have prepared and filed with the Securities and Exchange Commission a registration statement covering the shares of common stock to be issued upon due conversion of preferred stock, and such registration statement shall have been declared effective under the Securities Act of 1933, as amended, and continues to be effective, iii) during any preceding period of twenty consecutive trading days (while i) and ii) are fulfilled) the closing price equals or exceeds 150% of the conversion price, and iv) the Company is current on its dividends for that Series.

Registration Rights - In connection with the Series A-1 preferred stock subscription agreements, the Company agreed to pay the various subscribers 1/2% of the aggregate purchase price of shares acquired each month beginning on various dates between December 1, 2009 and July 1, 2010 until i) the Company has prepared and filed a registration statement with the Securities and Exchange Commission which has been declared effective under the Securities Act or the holder is then able to sell the underlying common shares under Rule 144 promulgated pursuant to the Securities Act and ii) the Company has obtained a ticker symbol and common shares are eligible to trade on the Over the Counter Bulletin Board (OTCBB). In May 2015 the Company’s common shares became eligible to trade on the OTCBB. At June 30, 2015 and December 31, 2014, the estimated liability amounted to $127,241 and $122,549, respectively, and the resulting change for the three and six months ended June 30, 2015 amounting to $4,692, respectively, is included as other expense in the accompanying statements of operations. The arrangement provides for no limitation as to the maximum potential consideration to be transferred.