Stockholders' Equity (Deficit)

6 Months Ended

Jun. 30, 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:

	Six months ended						Three months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
	(unaudited)						(unaudited)
Basic and Diluted:
Net loss applicable to common stockholder	$	(1,155	)	$	(1,122	)	$	(508	)	$	(558	)
Weighted average common shares outstanding		68,903,645			53,552,305			70,643,522			55,977,848
Net loss per common share	$	(0.02	)	$	(0.02	)	$	(0.01	)	$	(0.01	)

Warrants and stock options to purchase 922,667 and 1,810,762 common shares and preferred stock convertible into 591,937 and 564,586 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 June 30, 2012 and June 30, 2011, respectively.

Preferred Stock

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

	June 30,		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 June 30, 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 June 30, 2012 were $426,000

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 June 30, 2012 were $123,000

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 June 30, 2012 were $1,867,000

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 June 30, 2012 were $449,000

Issuance of Common Stock as Payment for Services

During the quarter ended June 30, 2012, the Company issued to two of the Company’s directors, Mauro Scimia (“Scimia”) and Xavier Carbonell (“Carbonell”), 426,427 and 1,023,424 shares of restricted, unregistered common stock, respectively, for consulting services rendered, and the Company recorded a charge of $25,500, or $0.02 per share, as a selling, general and administrative expense. For the six months ended June 30, 2012, we issued to Scimia and Carbonell an aggregate 1,200,056 and 1,713,019 shares of restricted, unregistered common stock respectively, for consulting services rendered, and recorded $53,500, or $0.02 per share, as a selling, general and administrative expense.

Also, during the quarter ended June 30, 2012, the Company issued 849,838 shares of restricted, unregistered common stock to a consultant for services rendered, and recorded $15,000 as a research and development expense.

During the quarter ended March 31, 2012, the Company issued 1,066,667 shares of restricted, unregistered common stock to two other consultants for services rendered, and recorded $12,000, or $0.02 per share, as a research and development expense and $10,000, or $0.02 per share, as a selling, general and administrative expense.

Issuance of Common Stock as Payment for Employee Compensation

During the quarter ended June 30, 2012, the Company issued to Augusto Ocana (“Ocana”), a director and vice president of the Company, 852,852 shares of restricted, unregistered common stock, for services rendered. The Company recorded a charge of $15,000, or $0.02 per share, as a selling, general and administrative expense. For the six months ended June 30, 2012, the Company issued 1,626,481 shares of restricted, unregistered common stock to an Ocana and recorded $30,000 or $0.02 per share as a selling, general and administrative expense.