Note 2.

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements included herewith include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Management believes that it is reasonably possible that the following material estimate affecting the financial statements could significantly change in the coming year: estimates as to the valuation allowance for the amounts recorded and held as inventory of goods and property and equipment.

Revenue Recognition

CCI recognizes revenue from product sales in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition,” when the following criteria are met: shipment of a product or license to customers has occurred and there are no remaining Company obligations or contingencies; persuasive evidence of an arrangement exists; sufficient vendor-specific, objective evidence exists to support allocating the total fee to all elements of the arrangement; the fee is fixed or determinable; and collection is probable.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.

Inventory

Inventory is valued at the lower of cost or market, using the first in, first out method. As of December 31, 2011, the Company in testing for lower of cost or market determined a writedown of the value of the inventory totaling $624,000 was required in the financial statements. Therefore, as of December 31, 2011, the Company had reduced the carrying value of the inventory to zero.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and are depreciated using the straight-line method over the assets’ estimated useful lives. Principal useful lives are as follows:

Furniture and fixtures	5 years
Laboratory equipment	5 years
Computer and communications equipment	3 years
Design and tooling	5 years
Machinery and equipment	7 years
Leasehold improvements	Useful life or term of lease, whichever is shorter

Normal maintenance and repairs for property and equipment are charged to expense as incurred, while significant improvements are capitalized.

Licenses, Patents, and Technology

Licenses, patents, and purchased technology are recorded at their acquisition cost. Costs to prepare patent filings are expensed when incurred. Costs related to abandoned or denied patents are written off at the time of abandonment or denial. Amortization is begun as of the date of acquisition or upon the grant of the final patent. Costs are amortized over the asset’s useful life, which ranges from two to 17 years. The Company assesses licenses, patents, and technology periodically for impairment.

Impairment or Disposal of Long-Lived Assets

At each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, management of the Company evaluates the recoverability of such assets. An impairment loss is recognized if the amount of undiscounted cash flows is less than the carrying amount of the asset, in which case the asset is written down to fair value. The fair value of the asset is measured by either quoted market prices or the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved.

Research and Development Costs

Research and development costs are charged to operations as incurred. CCI conducts a portion of its research activities under contractual arrangements with scientists, researchers, universities, and other independent third parties.

Stock Based Compensation

We follow the guidance of FASB Accounting Standards Codification Section 718-10, which requires that share-based payments be reflected as an expense based upon the grant-date fair value of those awards. The expense is recognized over the remaining vesting periods of the awards, if any.

Foreign Currency Translation

The functional currency of the Company’s foreign operations is the local currency. Accordingly, all assets and liabilities are translated into U.S. dollars using year-end exchange rates, and all revenues and expenses are translated using average exchange rates during the year. During 2011 and 2010 all foreign operations were dormant.

Fair Value of Financial Instruments

The carrying value of accounts receivable, accounts payable, accrued expenses and notes payable approximate their respective fair values due to their short maturities.

Other Comprehensive Income (Loss)

Translation adjustments related to the Company’s foreign dormant subsidiary are included in other comprehensive loss and reported separately in stockholders’ equity (deficit).

The Company’s comprehensive net loss is as follows:

	Year ended
	December 31,
	2011			2010
				(Unaudited)

Reported net loss	$	(2,876	)	$	(2,097	)
Less unpaid and undeclared preferred stock dividends		(266	)		(266	)
Net loss applicable to common stockholders		(3,142	)		(2,363	)
Foreign currency adjustment		(1	)		—
Comprehensive net loss applicable to common stockholders	$	(3,143	)	$	(2,363	)

Basic and diluted comprehensive net loss per common share	$	(0.05	)	$	(0.05	)
Basic and diluted weighted average number of common shares outstanding		58,233,600			45,688,465

Net Loss Per Share

Basic loss per share is calculated based on the weighted-average number of outstanding common shares. Diluted loss per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares, using the treasury stock method. CCI’s calculation of diluted net loss per share excludes potential common shares as of December 31, 2011 and 2010 as the effect would be anti-dilutive (i.e. would reduce the loss per share).

In accordance with SEC Accounting Series Release 280, the Company computes its income or loss applicable to common stock holders by subtracting dividends on preferred stock, including undeclared or unpaid dividends if cumulative, from it reported net loss and reports the same on the face of its statement of operations.

Income Taxes

CCI follows the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting carrying amounts and the respective tax bases of assets and liabilities, and are measured using tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Valuation allowances are provided against deferred tax assets if it is more likely than not that the deferred tax assets will not be realized.

The Company follows the guidance of FASB ASC 740-10 which relates to the Accounting for Uncertainty in Income Taxes , which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions. This Interpretation prescribes a comprehensive model for financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.

Risks from Concentrations

Revenues were derived solely from two customers in 2011 and 2010.

Recent Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards ASU 2011-05 to amend the guidance on the presentation of comprehensive income in ASC 220. ASU 2011-05 requires companies to present a single statement of comprehensive income or two separate but consecutive statements, a statement of operations and a statement of comprehensive income. ASU 2011-05 eliminates the alternative to present comprehensive income within the statement of equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The ASU should be applied retrospectively and is effective for annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASU 2011-12, which deferred the changes in ASU 2011-05 that relate to the presentation of reclassifications out of accumulated other comprehensive income. We do not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements.