12.  SUBSEQUENT EVENTS:

Debt Offering

In April 2014, the Company received $570,000 under the $3,000,000 debt offering and issued warrants to purchase 189,997 shares of our common stock.

Senior subordinate note payment

On April 15, 2014, the Company made the final required principal payment of $250,000 on the Senior Subordinated note payable.  See Note 6 Notes Payable for further discussion.

Preferred stock conversion to common shares

As of April 15, 2014, the final payment of the Senior Subordinated note payable was a triggering event to create a mandatory conversion of all remaining Series B and Series C Preferred stock outstanding.  As of April 15, 2014; 101,935 Series B preferred shares and 45,000 Series C preferred shares were converted into a total of 146,935 common shares subsequent to March 31, 2014.  On April 29, 2014, 4,000 shares of Series D Preferred stock were voluntarily converted to 4,000 shares of common stock.  As of May 14, 2014 there were 8,422,333 common shares outstanding.