NOTE 11. NON VOTING CONVERTIBLE PREFERRED STOCK
On March 27, 2012 the company issued to Southridge
75,000 shares of its nonvoting convertible preferred stock to Southridge in accordance with the terms of an Equity Purchase Agreement
entered into by and between the Company and Southridge which was terminated at the Companys option on June 1, 2012 (February
Non Voting Convertible Preferred Stock is convertible
at the option of the holder into shares of the Companys common stock at a conversion price equal to seventy percent (70%)
of the lowest Closing Price for the five (5) trading days immediately preceding written receipt by the Company of the holders
intent to convert.
CLOSING PRICE" shall mean the closing
bid price for the Companys common stock on the Principal Market on a Trading Day as reported by Bloomberg Finance L.P.
PRINCIPAL MARKET" shall mean the
principal trading exchange or market for the Companys common stock.
TRADING DAY shall mean a day
on which the Principal Market shall be open for business.
The issuance of 75,000 shares of the
Companys nonvoting convertible preferred stock to Southridge resulted in recognition of a beneficial conversion feature
in the amount of $32,142. Accordingly, the Company recorded a deemed dividend on the 75,000 shares of the Companys
nonvoting convertible preferred stock of $32,142.