Stockholders' Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity

Note 7. Stockholders’ Equity

Earnings (loss) per share

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

	For the Years Ended December 31,
	2011			2010
Basic and Diluted:
Reported net loss (in thousands)	$	(2,876	)	$	(2,097	)
Less unpaid and undeclared preferred stock dividends		(266	)		(266	)
Net loss applicable to common stockholder	$	(3,142	)	$	(2,363	)
Weighted average common shares outstanding		58,233,600			45,688,465
Net loss per common share	$	(0.05	)	$	(.05	)

Warrants to purchase 922,667 and 4,084,709 shares and preferred stock convertible into 577,816 and 550,483 shares for the years ended December 31, 2011, and 2010, respectively, and stock options to purchase 10,000 shares of common stock at December 31, 2010 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 years ended December 31, 2011 and 2010, respectively.

Preferred Stock

A summary of the Company’s preferred stock as of December 31 is as follows:

			Shares Issued &				Preferred Stock Dividends
	Shares		Outstanding				Undeclared and Unpaid
Offering	Authorized		2011		2010		2011		2010
Series A convertible		590,197		47,250		47,250		—		—
Series B convertible, 10% cumulative		1,500,000		93,750		93,750		37,500		37,500
Series C convertible, 10% cumulative		1,666,666		38,333		38,333		11,500		11,500
Series D convertible, 10% cumulative		300,000		175,000		175,000		175,000		175,000
Series E convertible, 10% cumulative		800,000		19,022		19,222		42,000		42,000
Undesignated Preferred Series		5,143,137		—		—		—		—
Total Preferred Stock		10,000,000		373,355		373,555		266,000		266,000

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 dividends in arrears at December 31, 2011 were $407,000
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 dividends in arrears at December 31, 2011 were $117,000
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 dividends in arrears at December 31, 2011 were $1,780,000

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 dividends in arrears at December 31, 2011 were $428,000

Issuance of Securities

Common Stock

Issuance of Common Stock for Conversion of Debt

For the year ended December 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 price of $0.01 per share.

Issuance of Common Stock as Payment for Services

As of December 31, 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 a selling, general and administrative (“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 December 31, 2011, we became contractually obligated to issue 300,000 shares of restricted, unregistered common stock to a medical consultant, and recorded $6,000 as an R&D expense. During the year ended December 31, 2011, we became obligated to issue a total of 1,450,000 of restricted, unregistered common stock to this consultant, and recorded $24,000 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 December 31, 2011, we were contractually obligated to issue 384,615 shares of common stock to an employee for compensation and recorded $5,000 as an SG&A expense. For the year ended December 31, 2011, we were obligated to issue a total of 3,104,179 shares of common stock to this employee for services rendered totaling $44,000.

In addition, during the quarter ended December 31, 2011, we were contractually obligated to issue 615,384 shares of restricted, unregistered stock to marketing consultants and recorded $8,000 as an SG&A expense. During the year ended December 31, 2011, we became obligated to issue 3,751,130 of restricted, unregistered common stock to these consultants, and recorded $44,000 as an SG&A expense.

As of December 31, 2011, we have a total of 3,752,192 shares of common stock issuable from the current and prior periods.

During the quarter ended December 31, 2010, CCI received proceeds of $50,000 and issued 833,333 shares of restricted unregistered common stock and warrants to purchase 416,667 shares of restricted unregistered common stock at a price of $0.06 per share. For the year ended December 31, 2010, the Company received proceeds of $100,000 and issued 1,333,333 shares of restricted unregister common stock and warrants to purchase 666,333 shares of restricted unregistered shares of common stock at an average exercise price of $0.07 per share. The warrants have a term of three years.

During the quarter ended March 31, 2010, a settlement agreement was approved by the court and CCI issued 2,658,800 shares of restricted unregistered common stock and a warrant to purchase 217,000 shares of restricted unregistered common stock to NeoMed Innovation III L.P. The Company valued the common stock at $0.19 per share for a total of $505,000 using fair value and the warrant at $33,000 using the Black-Scholes method. The warrant has a term of three years and is exercisable immediately. The aggregate cost totaling $538,000 was recorded as other expense in 2009.

Also in the first quarter of 2010, CCI issued 31,637 shares of restricted, unregistered common stock valued at an average $0.19 per share to a consultant as payment for services rendered. The Company recorded the value of the common stock at $6,000 and recorded the amount as a selling, general and administrative expense. The Company also issued 119,169 vested shares of restricted, unregistered common stock valued at a weighted average $0.19 per share to a consultant as payment for services rendered. The Company recorded the value of the common stock at $30,000 and recorded the amount as a selling, general and administrative expense in 2009 and issued the shares in the second quarter of 2010.

During the quarter ended December 31, 2010, the Company issued 350,000 shares of restricted, unregistered common stock valued at $0.06 per share to a non-executive employee. The Company recorded the value of the common stock at $21,000 and recorded the amount as a selling, general and administrative expense. During the year ended December 31, 2010, CCI issued an aggregate 450,000 vested shares of restricted, unregistered common stock valued at $0.08 per share to a non-executive employee. The Company recorded the value of the common stock at $36,000 and recorded the amount as a selling, general and administrative expense.

Also during the fourth quarter of 2010, a holder of a note converted $19,500 of principal into 1,060,626 shares of common stock at an average fair value of $0.018 per share.

During the quarter ended September 30, 2010, CCI issued 66,667 shares of restricted, unregistered common stock value at $0.15 per share using fair value for the settlement of debt totaling $10,000.

Conversions of Preferred Stock

During the quarter ended December 31, 2011, a holder of 200 shares of Series E Convertible Preferred Stock of CCI elected to convert such preferred shares and accrued and unpaid dividends thereon into 10,916 unregistered shares of the Company’s common stock. Dividends on these preferred shares were $118.00

Warrants

During the quarter ended December 31, 2011, CCI issued warrants to a non-executive employee to purchase 2,000 shares of restricted, unregistered common stock at an exercise price of $0.01 per share. The warrants were valued at $39 using the Black-Scholes valuation model and recorded the amount as a selling, general and administrative expense. For the year ended December 31, 2011, the Company issued warrants to a non-executive employee to purchase an aggregate 13,000 shares of restricted, unregistered common stock at an average exercise price of $0.02 per share. The warrants were valued at $238 using the Black-Scholes valuation model and recorded the amount as a selling, general and administrative expense.

During the quarter ended December 31, 2010, the Company issued warrants to purchase 2,000 shares of common stock at an exercise price of $0.04 per share to an employee. During the year ended December 31, 2009, the Company issued warrants to purchase 13,000 shares of common stock with a weighted average exercise price of $0.16 per share to an employee. CCI valued the warrants at $2,000 using the Black-Scholes valuation model and recorded the amount as non-cash compensation expense. These warrants have a term of three years and are immediately exercisable.

Application of Black-Scholes Valuation Model

In applying the Black-Scholes valuation model, the Company used the following assumptions for the years ended December 31:

	2011			2010
Expected volatility		389% - 420	%		141% - 265	%
Expected term (years)		3			.21 - 3
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

Expected volatility is based solely on historical volatility of our common stock over the period commensurate with the expected term of the warrants or stock options. The expected term calculation is based upon the expected term the warrant or option is to be held, which in most cases is one-half of the term of the warrant or option. The risk-free interest rate is based upon the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that we have never paid cash dividends on our common stock and we have no present intention to pay cash dividends.

Warrants

At December 31, 2011, the Company had the following outstanding warrants to purchase shares of Common Stock:

	Total Warrant		Warrant Shares		Exercise Price		Weighted Average
	Shares Outstanding		Exercisable		(not weighted)		Years until Expiration
		13,000		13,000	$	0.01		2.50
		4,000		4,000	$	0.03		1.78
		418,667		418,667	$	0.06		1.75
		2,000		2,000	$	0.09		0.62
		259,000		259,000	$	0.10		1.89
		9,000		9,000	$	0.20		0.39
		217,000		217,000	$	0.50		1.14
Total		922,667		922,667