Accounting Policies

9 Months Ended

Sep. 30, 2014

Accounting Policies:

Earnings Per Share, Policy

LOSS PER SHARE

Loss per share is computed on the basis of the weighted average number of shares and common stock equivalents outstanding during the period.  In the calculation of diluted loss per share, shares outstanding are adjusted to assume conversion of the Company’s non-interest bearing convertible stock and exercise of options as if they were dilutive.  In the calculation of basic loss per share, weighted average numbers of shares outstanding are used as the denominator.

The Company had net loss allocable to common stockholders for the three and nine months ended September 30, 2014 and 2013.  Loss per share is computed as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Numerator:
Net loss available to common stockholders-basic
and diluted	$	(905,000	)	$	(156,000	)	$	(3,068,000	)	$	(2,279,000	)
Denominator:
Weighted average shares used to compute net loss available to common stockholders per common share-basic and diluted		3,587,000			3,594,000			3,587,000			3,594,000
Basic and diluted net loss per share to common stockholders	$	(0.25	)	$	(0.04	)	$	(0.86	)	$	(0.63	)

All options outstanding to purchase shares of common stock and shares of common stock issued on the assumed conversion of the eligible preferred stock were excluded from the diluted loss per common share calculation for the three and nine months ended September 30, 2014 and 2013, as the inclusion of these options would have been antidilutive.

Subsequent Events, Policy

SUBSEQUENT EVENTS

Failure to Satisfy a Continued NASDAQ Listing Rule or Standard

On April 7, 2014 the Company received a notification letter from the NASDAQ Stock Market advising the Company of its failure to comply with the required minimum of $2,500,000 in stockholders’ equity for continued listing on the NASDAQ Capital Market, pursuant to NASDAQ listing rule 5550(b)(1).  The Company fell below the minimum requirement with reported stockholders’ equity of $1,829,000 in its Form 10-K for the year ended December 31, 2013.  The Company’s loss in the first nine months of 2014 further reduced the reported stockholders’ equity to $837,000.

The Company presented its plan to NASDAQ on May 22, 2014, which included the conversion of outstanding debt into equity, and improved operating results. On May 29, 2014 NASDAQ granted the Company an extension of time in which to regain compliance, and then on August 20, 2014 granted an additional extension of time to regain compliance, but the Company has now passed the limit of the NASDAQ staff’s available discretion to extend.  Therefore, on October 8, 2014 NASDAQ sent the Company a letter stating that the Company is out of compliance and will be delisted unless the Company appeal NASDAQ’s determination.  The Company filed an appeal on October 15, 2014, and the hearing before the Hearings Panel is scheduled for December 4, 2014.  The Hearings Panel can accept or reject the Company’s appeal at NASDAQ’s sole discretion.  If NASDAQ accepts the Company’s appeal NASDAQ would grant us an additional period of time in which to regain compliance, of up to six months from the date of the latest NASDAQ letter.