Note 4 – Net Income (Loss) per Common Share – Basic and Diluted

Net income (loss) per common share – basic is computed by dividing reported net income (loss) by the weighted average common shares outstanding. Our preferred stockholders have no obligation to fund the Company’s losses; accordingly, no losses are allocated to shares of preferred stock during the three months ended March 31, 2011. In the periods when the Company earns net income, net income per common share – basic is determined using the two-class method. Under this method, net income per share is calculated for common stock and participating securities such as preferred stock considering both dividends declared (or accumulated) and participation rights in undistributed earnings as if all such earnings had been distributed during the period.

Except where the result would be anti-dilutive, net income (loss) per common share - diluted has been computed assuming the conversion of outstanding shares of preferred stock into common stock, and the exercise of stock warrants and stock options. The two-class method is used to allocate net income between shares of preferred and common stock if the results are more dilutive to common stock than the conversion of preferred stock into common stock. For the three months ended March 31, 2012 the two-class method was used and the net earnings were allocated between common and preferred holders to compute the dilutive effect of the preferred shares. The Company's 5.05% Convertible Note, represents 3,937,008 potentially dilutive shares, however, the conversion price of the Note was higher at March 31, 2012 than the average share price, so the Note was determined to be anti-dilutive. The Company's outstanding stock options with a strike price lower than the average share price were evaluated for dilutive effect, but the proceeds from the strike price, when taken together with the unamortized future compensation amount, yielded a price higher than the average share price making them anti-dilutive. Outstanding warrants with a strike price lower than the average share price have been included as a dilutive factor. For the three months ended March 31, 2011, the assumed conversion of convertible preferred stock and the exercise of stock warrants and stock options anti-dilutive due to the Company's net losses and are excluded in determining net loss per common share - diluted.

Net income (loss) per common share has been computed as follows using the weighted average number of common shares outstanding during the periods presented: