Stockholders' Equity (Deficit)

3 Months Ended

Mar. 31, 2012

Stockholders' Equity (Deficit)

Note 7. 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:

	March 31,			March 31,
	2012			2011
	(unaudited)
Basic and Diluted:
Net loss applicable to common stockholder (in thousands)	$	(647	)	$	(563	)
Weighted average common shares outstanding		67,163,767			49,436,617
Net loss per common share	$	(0.01	)	$	(0.01	)

Warrants to purchase 922,667 and stock options and warrants to purchase 2,507,362 common shares and preferred stock convertible into 584,891 and 557,496 common 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 periods ended March 31, 2012 and March 31, 2011, respectively.

Preferred Stock

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

	March 31,		December 31,
	2012		2011
	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		19,022		19,022
Total Preferred Stock		373,355		373,355

As of March 31, 2012 and 2011, the Company had cumulative preferred undeclared and unpaid dividends. In accordance with Accounting Standards Codification 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 March 31, 2012 were $416,000

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 March 31, 2012 were $120,000

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 March 31, 2012 were $1,824,000

Series E Convertible Preferred Stock

Liquidation Value:	$22.00 per share, $418,488
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 March 31, 2012 were $438,000

Issuance of Common Stock as Payment for Services

During the quarter ended March 31, 2012, the Company issued 2,529,891 shares of restricted, unregistered common stock to consultants for services rendered, and recorded $50,000 as a selling, general and administrative expense.

Issuance of Common Stock as Payment for Employee Compensation

Also during the quarter ended March 31, 2012, the Company issued 773,629 shares of restricted, unregistered common stock to an employee and recorded $15,000 as a selling, general and administrative expense.