Stockholders' Equity (Deficit)

3 Months Ended

Mar. 31, 2014

Stockholders' Equity (Deficit) [Abstract]

Stockholders' Equity

Note 6. 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,
	2014		2013
Basic and Diluted:
Net loss applicable to common stockholder (in thousands)	$	(394)	$	(170)
Weighted average common shares outstanding		277,535,857		78,610,477
Net loss per common share	$	(0.00)	$	(0.00)

Warrants to purchase 2,839,000 and 705,667 common shares and preferred stock convertible into 484,566 and 471,105 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, 2014 and March 31, 2013, respectively.

Preferred Stock

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

	March 31,		December 31,
	2014		2013
	Shares Issued &		Shares Issued &
Offering	Outstanding		Outstanding
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, 2014 and 2013, the Company had cumulative preferred undeclared and unpaid dividends. In accordance with the Financial Accounting Standard Board’s 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, 2014 were $491,000

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, 2014 were $143,000

Series D Convertible Preferred Stock

Liquidation Value:	$10.00 per share, $525,000
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, 2014 were $643,000

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, 2014 were $522,000

Sale of Common Stock

During the quarter ended March 31, 2014, the Company sold 1,250,000 shares of restricted, unregistered common stock to an affiliate of Dr. John Abeles, a director of the Company for $25,000 or $0.02 per share. In addition, the Company will issue warrants to purchase  2,800,000 shares of common stock of the Company to Dr. Abeles for services rendered to the Company. The warrants have a term of ten years and are exercisable at $0.04 per share. The warrants are callable by the Company if the closing bid price of the Company’s common stock exceeds 100% of the exercise price for a period of ninety trading days. The warrants became issuable upon the change of control of the Company and may be exercised at any time. The Company valued the warrants at $84,000 and expensed them to selling, general and administrative expense. The Company used the Black Scholes Merton pricing model with the significant assumptions of $0.03 per share fair value of the underlying common stock, term of 5 years, risk free rate of 1%.

Also, during the quarter ended March 31, 2014, the Company sold 1,000,000 shares of restricted, unregistered common stock to a qualified investor for $20,000 or $0.02 per share.

Reversal of the Issuance of Common Stock as payment for Services

During the quarter ended March 31, 2014, the Company reversed $21,000 of consulting compensation expense from a consulting agreement issued several years prior. The consultant never completed any of the tasks required under the contract and therefore did not meet the requirements to vest any of the 700,000 shares granted, but never issued, under the contract. The $21,000 was a reduction in selling, general & administrative expense.