Stockholders' Equity (Deficit)

9 Months Ended

Sep. 30, 2011

Stockholders' Equity (Deficit)

Note 8.             Stockholders’ Equity (Deficit)

   Loss per share

A reconciliation of the numerator and the denominator used in the calculation of loss per share is as follows:

	Nine months ended						Three months ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30,  2010
	(unaudited)						(unaudited)
Basic and Diluted:
Net loss applicable to common stockholder	$	(1,550	)	$	(1,301	)	$	(560	)	$	(538	)
Weighted average common shares outstanding		55,644,245			47,141,033			59,759,909			46,608,865
Net loss per common share	$	(0.03	)	$	(0.03	)	$	(0.01	)	$	(0.01	)

For the periods ended September 30, 2011 and September 30, 2010, there were 1,205,762 and 3,807,935 stock options and warrants to purchase common shares, and preferred stock convertible into 571,754 and 543,315 common shares, respectively. These shares were not included in the computation of diluted loss per share applicable to common stockholders as they are anti-dilutive as a result of net losses for the respective periods.

   Preferred Stock

A summary of the Company’s preferred stock is as follows:

	September 30,		December 31,
	2011		2010
	Shares Issued &		Shares Issued &
Offering	Outstanding		Outstanding
	(unaudited)
Series A convertible		47,250		47,250
Series B convertible, 10% cumulative dividend		93,750		93,750
Series C convertible, 10% cumulative dividend		38,333		38,333
Series D convertible, 10% cumulative dividend		175,000		175,000
Series E convertible, 10% cumulative dividend		19,222		19,222
Total Preferred Stock		373,555		373,555

As of September 30, 2011 and 2010, the Company had cumulative preferred undeclared and unpaid dividends. In accordance with ASC 260-10-45-11, “Earnings per Share”, these dividends were added to the net loss in the net loss per share calculation.

Summary of Preferred Stock Terms

Series A Convertible Preferred Stock
Liquidation Value:	$4.50 per share, $212,625
Conversion Price:	$103.034 per share
Conversion Rate:	0.04367—Liquidation Value divided by Conversion Price ($4.50/$103.034)
Voting Rights:	None
Dividends:	None
Conversion Period:	Any time

Series B Convertible Preferred Stock
Liquidation Value:	$4.00 per share, $375,000
Conversion Price:	$10.00 per share
Conversion Rate:	0.40—Liquidation Value divided by Conversion Price ($4.00/$10.00)
Voting Rights:	None
Dividends:	10%—Quarterly—Commencing March 31, 2001
Conversion Period:	Any time

Cumulative and undeclared dividends in arrears at September 30, 2011 were $398,000

Series C Convertible Preferred Stock
Liquidation Value:	$3.00 per share, $115,000
Conversion Price:	$6.00 per share
Conversion Rate:	0.50—Liquidation Value divided by Conversion Price ($3.00/$6.00)
Voting Rights:	None
Dividends:	10%—Quarterly—Commencing March 31, 2002
Conversion Period:	Any time

Cumulative and undeclared dividends in arrears at September 30, 2011 were $114,000

 Series D Convertible Preferred Stock

Liquidation Value:	$10.00 per share, $1,750,000
Conversion Price:	$10.00 per share
Conversion Rate:	1.00—Liquidation Value divided by Conversion Price ($10.00/$10.00)
Voting Rights:	None
Dividends:	10%—Quarterly—Commencing April 30, 2002
Conversion Period:	Any time

Cumulative and undeclared dividends in arrears at September 30, 2011 were $1,736,000

Series E Convertible Preferred Stock

Liquidation Value:	$22.00 per share, $422,888
Conversion Price:	$8.00 per share
Conversion Rate:	2.75—Liquidation Value divided by Conversion Price ($22.00/$8.00)
Voting Rights:	Equal in all respects to holders of common shares
Dividends:	10%—Quarterly—Commencing May 31, 2002
Conversion Period:	Any time

Cumulative and undeclared dividends in arrears at September 30, 2011 were $422,000

Issuance of Common Stock for Conversion of Debt
 

For the nine months ended September 30, 2011, the Asher Enterprises converted a total of $55,500 of principal and $3,000 of accrued interest into 7,306,588 shares of common stock at an average fair price of $0.01 per share.

Issuance of Common Stock as Payment for Services

As of September 30, 2011, we are contractually obligated to issue 700,000 shares of restricted, unregistered common stock to a financial consultant as payment for services. We recorded a charge of $21,000 for these shares as an SG&A expense during the quarter ended March 31, 2011. The shares have not yet been issued by the transfer agent.

During the quarter ended September 30, 2011, we became contractually obligated to issue 600,000 shares of restricted, unregistered common stock to a medical consultant, and recorded $6,000 as an R&D expense. During the nine months ended September 30, 2011, we became obligated to issue a total of 1,150,000 of restricted, unregistered common stock to this consultant, and recorded $18,000 as an SG&A expense. The shares have not yet been issued. An additional 338,860 shares, that became issuable and were recorded in the prior year, also have not yet been issued.

Also during the quarter ended September 30, 2011, we were contractually obligated to issue 1,643,636 shares of common stock to an employee for compensation and recorded $15,000 as an SG&A expense. For the nine months ended September 30, 2011, we were obligated to issue a total of 2,719,494 shares of common stock to this employee for services rendered totaling $39,000. The shares have not yet been issued. An additional 450,000 shares that became issuable and were recorded in the prior year also have not yet been issued.

In addition, during the quarter ended September 30, 2011, we were contractually obligated to issue 2,380,189 shares of restricted, unregistered stock to marketing consultants and recorded $21,000 as an SG&A expense. During the nine months ended September 30, 2011, we became obligated to issue 3,135,745 of restricted, unregistered common stock to this consultant, and recorded $36,000 as an SG&A expense. The shares have not yet been issued.

As of September 30, 2011, we have a total of 9,707,293 shares of common stock issuable from the current and prior periods.

Application of Black-Scholes Valuation Model

In applying the Black-Scholes valuation model, the Company used the following assumptions for the nine months ended September 30, 2011 and 2010:

	2011			2010
Expected volatility		36%-420	%		240%-319	%
Expected term (years)		.04-2.51			1.5
Risk-free interest rate		1.00	%		1.00	%
Expected dividend yield		0	%		0	%
Forfeiture rate		0	%		0	%
Resulting weighted average grant date fair value	$	0.02		$	0.15