stock. I have warned about our Preferreds use for years. Today, in MOST instances (subject to the terms attached to the preferreds) I would still be opposed to use of our 5,000,000 Preferred Shares. My absolute blanket opposition in the past was because there was a high risk of our former debenture holders ending up with the Preferreds, and Common shareholders could have really been distroyed; this not happening was a MAJOR win for retail shareholders and the BOD should be applauded. The BOD in their sole discretion can issue these Preferred Shares, so this is something Shareholders should always be cautious, vocal and viligent about.

However, the capitalization structure we are under today is different than in years past, so under the right circumstances (terms, and assets acquired) it could be an option. But looking at the landscape today, since ES and Lincoln holds common shares just like retail, (and BOD members, former CEOs, and present executive management now have millions of vested Common shares), I doubt they would be supportive of any use of those Preferreds which put Common shareholders at a disadvantage or would negatively impact Common share value/benefits ; either from a voting power standpoint, dividend standpoint, or through Conversion dilution.

Not only is there this Preferred Shares consideration to keep in mind, but also the use of our Treasury Shares if they are to be used for currency in an Acquisition or Merger in some way. This is a large important discussion, of which pricing and ramifications should be understood.

Good fortune

*Opinions disclaimers

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Preferred stock usually carry no voting rights but may carry superior voting rights to common stock.[1][2] Preferred stock may carry a dividend that is paid out prior to any dividends to common stock holders. Preferred stock may have a convertibility feature into common stock. Preferred stockholders will be paid out in assets before common stockholders and after debt holders in bankruptcy. Terms of the preferred stock are stated in a "Certificate of Designation".

Rights

Unlike common stock, preferred stock usually has several rights attached to it:

• The core right is that of preference in the payment of dividends and upon liquidation of the company. Before a dividend can be declared on the common shares, any dividend obligation to the preferred shares must be satisfied.
• The dividend rights are often cumulative, such that if the dividend is not paid it accumulates from year to year.
• Preferred stock may or may not have a fixed liquidation value, or par value, associated with it. This represents the amount of capital that was contributed to the corporation when the shares were first issued. [3].
• Preferred stock has a claim on liquidation proceeds of a stock corporation, equivalent to its par or liquidation value unless otherwise negotiated. This claim is senior to that of common stock, which has only a residual claim.
• Almost all preferred shares have a negotiated fixed dividend amount. The dividend is usually specified as a percentage of the par value or as a fixed amount. For example Pacific Gas & Electric 6% Series A preferred.
• Some preferred shares have special voting rights to approve certain extraordinary events (such as the issuance of new shares or the approval of the acquisition of the company) or to elect directors, but most preferred shares provide no voting rights associated with them. Some preferred shares only gain voting rights when the preferred dividends are in arrears for a substantial time.
• Usually preferred shares contain protective provisions which prevent the issuance of new preferred shares with a senior claim. Individual series of preferred shares may have a senior, pari-passu or junior relationship with other series issued by the same corporation.
• Occasionally companies use preferred shares as means of preventing hostile takeovers, creating preferred shares with a poison pill or forced exchange/conversion features that exercise upon a change in control.

The above list, although including several customary rights, is far from comprehensive. Preferred shares, like other legal arrangements, may specify nearly any right conceivable. Preferred shares in the U.S. normally carry a call provision[4], enabling the issuing corporation to repurchase the share at its (usually limited) discretion.

Some corporations contain provisions in their charters authorizing the issuance of preferred stock whose terms and conditions may be determined by the board of directors when issued. These "blank check" preferred shares are often used as takeover defense (see also poison pill). These shares may be assigned very high liquidation value that must be redeemed in the event of a change of control or may have enormous supervoting powers.

In the United States there are two types of preferred stocks: straight preferreds and convertible preferreds. Straight preferreds are issued in perpetuity (although some are subject to call by the issuer under certain conditions) and pay the stipulated rate of interest to the holder. Convertible preferreds--in addition to the foregoing features of a straight preferred--contain a provision by which the holder may convert the preferred into the common stock of the company (or, sometimes, into the common stock of an affiliated company) under certain conditions, among which may be the specification of a future date when conversion may begin, a certain number of common shares per preferred share, or a certain price per share for the common.

There are income tax advantages generally available to corporations that invest in preferred stocks in the United States that are not available to individuals.

Some argue that a straight preferred stock, being a hybrid between a bond and a stock, bears the disadvantages of each of those types of securities without enjoying the advantages of either. Like a bond, a straight preferred does not participate in any future earnings and dividend growth of the company and any resulting growth of the price of the common. But the bond has greater security than the preferred and has a maturity date at which the principal is to be repaid. Like the common, the preferred has less security protection than the bond. But the potential of increases of market price of the common and its dividends paid from future growth of the company is lacking for the preferred.

Suppose that an investor paid par ($100) today for a typical straight preferred. Such an investment would give a current yield of just over 6%. Now suppose that in a few years 10-year Treasuries were to yield 13+% to maturity, as they did in 1981; these preferreds would yield at least 13%, which would knock their market price down to $46, for a 54% loss. (In all probability, they would yield some 2% more than the Treasuries--or something like 15%, which would take the market price down to $40, for a 60% loss.)

The important difference between straight preferreds and Treasuries (or any investment-grade Federal agency or corporate bond) is that the bonds would move up to par as their maturity date is approached, whereas the straight preferred, having no maturity date, might remain at these $40 levels (or lower) for a very long time.

Advantages of straight preferreds posited by some advisers include higher yields and tax advantages (currently yield some 2% more than 10-year Treasuries, rank ahead of common stock in the case of bankruptcy, dividends are taxable at a maximum 15% rather than at ordinary income rates, as in the case of bond interest).

http://en.wikipedia.org/wiki/Preferr...

Could someone from the board put together a shareholder letter to the company about this? We shouldn't wait to make our thoughts known to the board of directors concerning this. Who will take this on? We need to get our thoughts together on this, probably already should have sent a letter. Maybe Ron could help us out or there are others here that are capable. I could be overly alarmed by biajj’s post I hope so. I know this is not something to worry about near term, but we can be choose to be proactive and it may make a major difference six months from now.

No SGE I will not get hung up on this. LOL GLTYA

Accentuate the positive!

Bluewing

Accentuate the positive!

Bluewing

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From PTSC's 5/5/2000 S-3

FIFTH. The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is ONE HUNDRED FIVE MILLION (105,000,000), having a par value of $.00001 per share, of which ONE HUNDRED MILLION (100,000,000) shall be designated Common Stock (the "Common Stock" or "Common Shares"), and FIVE MILLION (5,000,000) shall be designated Preferred Stock, par value $.00001 per share (the "Preferred Stock"). The Preferred Stock may be issued from time to time in one or more series. All shares shall be issued for such consideration or considerations as the Board of Directors of the Corporation may from time to time determine. All rights, preferences, voting powers, relative, participating, optional or other special rights and privileges, and qualifications, limitations or restrictions of the Preferred Stock shall be fixed by the Board of Directors of the Corporation. The rights, preferences, voting powers, relative, participating, optional or other special rights and privileges, and qualifications, limitations or restrictions of the Common Stock shall be expressly made subject and subordinate to those that may be fixed with respect to any shares of the Preferred Stock and shall be as follows:

IN WITNESS WHEREOF, Patriot Scientific Corporation has caused this Certificate to be executed by James T. Lunney, its authorized officer, on this 28th day of April, 2000.

/s/ JAMES T. LUNNEY

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IMO we as retail shareholders need to be & remain extrememly diligent regarding the Preferreds... (IMO) The potential for abuse and /or misuse of the Preferreds, to the detriment of retail, is at very least a possibility. It is another very important reason to be concerned who is appointed to, or has close representation on, the BoD. Schrock IMO is definitely a nice addition... new blood, exceptional credentials. Nice job RG...

jmo... ikn'