NOTE 7

PREFERRED STOCK ISSUANCE AND CONVERSION

Series B Preferred Stock

The Series B Preferred Stock of the Company’s consolidated subsidiary, M&EC, is non-voting and non-convertible, has a $1.00 liquidation preference per share and may be redeemed at the option of the former stockholders of M&EC at any time for the per share price of $1.00. The holders of the Series B Preferred Stock will be entitled to receive when, as, and if declared by the Board of M&EC out of legally available funds, dividends at the rate of 5% per year per share applied to the amount of $1.00 per share, which dividends are fully cumulative. M&EC has failed to pay dividends on its Series B Preferred Stock since the Series B Preferred Stock was issued. Since the dividends on M&EC’s Series B Preferred Stock are cumulative, M&EC has been accruing dividends for the Series B Preferred Stock issued July 2002, and have accrued a total of approximately $995,000 of unpaid cumulative dividends since July 2002, of which $64,000 was accrued in each of the years ended December 31, 2003 to 2017 and is included in other long term liabilities in the accompanying Consolidated Balance Sheets.