jtomm: I agree the preferred stock series B is a bit deceptive, but they've got them in the owner's equity section of the balance sheet in accordance with GAAP rules. They're paying $210k in dividends on them quarterly (7% annual rate) and that shows up on the income statement. So if the Company issued long term debt at 7% to payoff the preferred stock, net income would not change.
They're not convertible by the holders, but redeemable by the Board of Directors at any time, so while I doubt they'll ever get exchanged for common stock, the potential is there. That's the deception ... no requirement to put them in the fully diluted share count. And of course the holders are the insiders who control the Board of Directors anyway. From the SEC filings ....
The Series B Preferred Stock (the "Preferred Stock") has priority over the Company's common stock with respect to the payment of dividends and the distribution of assets. Cash dividends on the Preferred Stock shall be payable quarterly when and as declared by the Board of Directors. Interest accrues on unpaid dividends at the rate of 7% per annum. No dividends may be paid on any class of stock ranking junior to the Preferred Stock unless Preferred Stock dividends have been paid. Liquidation preference is equal to the stated value per share. The Preferred Stock is redeemable at any time at the option of the Board of Directors at a redemption price equal to the stated value per share. Holders of the Preferred Stock do not have any voting rights unless the Company fails to pay dividends for four consecutive dividend payment dates.
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