STOCKHOLDERS' EQUITY:

9 Months Ended

Sep. 30, 2014

STOCKHOLDERS' EQUITY:

STOCKHOLDERS' EQUITY:

NOTE 6 — STOCKHOLDERS’ EQUITY:

Common Shares:

For a description of the public offerings and sales of common stock that occurred prior to 2014, refer to the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Preferred Shares:

During July 2014, the Company sold to one investor 4,000 units consisting of one share of the Company’s Series B 6% convertible preferred stock, no par value, and a warrant to purchase the Company’s common stock, par value $0.001 per share, at a stated value of $1,000 per unit.  Each share of Series B convertible preferred stock is immediately convertible into shares of common stock at a conversion rate of approximately 1,271 shares of common stock for each share of Series B convertible preferred stock (equivalent to a conversion price of $0.7866 per share of common stock).  The offering yielded gross proceeds, before offering expenses, of $4.0 million (net proceeds of $3.5 million after deducting placement agent and investor fees and expenses and other offering expenses).  The preferred stock has no voting rights but will entitle the holders to receive cumulative dividends at the rate of 6% per annum per share, payable quarterly.  The dividends are payable in either cash or common stock at the Company’s discretion.  As of September 30, 2014, 474 shares of the Series B 6% convertible preferred stock had been converted into 602,592 shares of common stock.

Liquidation:  Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of the preferred stock are entitled to receive distributions out of the Company’s assets, whether capital or surplus, before any distributions may be made on any other outstanding classes of stock.  The amount received by holders of the preferred stock will be equal to the stated value of $1,000 per share of preferred stock plus any accrued and unpaid dividends thereon, and any other fees or liquidated damages then due and owing.

Warrants:  Each warrant allows the holder to purchase approximately 636 shares of the Company’s common stock and is immediately exercisable.  The warrants are not listed on a national securities exchange and do not have the rights or privileges of a holder of common stock, including any voting rights, until the holder exercises the warrant.  The following table summarizes exercise prices and expiration dates of outstanding common stock purchase warrants as of September 30, 2014.

Number of Warrants	Exercise Price Per Share		Expiration Date
4,000	$	1.0816	November 30, 2018