Annual report pursuant to Section 13 and 15(d)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $)
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (4,084,427) $ (3,450,205)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation and amortization 79,563 107,519
Accretion of interest and amortization of debt issue costs 708,729 91,315
Stock-based compensation expense 136,796 133,193
Amortization of third party fees paid in restricted common stock 480,492 489,605
Net change in inventory reserves    50,000
Change in fair value of warrant derivative liability (113,713) (144,840)
Recovery of bad debt expense    (9,600)
Changes in operating assets and liabilities:    
Accounts receivable 68,630 84,988
Inventories 186,686 95,651
Accounts payable (97,074) 309,170
Accrued employee compensation 29,995 (61,099)
Deferred revenue and other accrued expenses 257,387 119,403
Prepaid expenses and other current assets 4,333 20,099
Net cash used in operating activities (2,342,603) (2,164,801)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment (58,749)   
Net cash used in investing activities (58,749)   
CASH FLOWS FROM FINANCING ACTIVITIES:    
Borrowings on convertible debt, net of issuance costs 1,374,297 1,394,000
Borrowings on related party and other debt, net of issuance costs 222,000 98,675
Repayment of related party and other debt (180,304)   
Repayment of convertible debt (350,000) (101,556)
Payment of dividends (60,000) (196,818)
Net proceeds from the issuance of common stock    377,453
Net proceeds from the issuance of preferred stock 1,425,315 371,733
Net cash provided by financing activities 2,431,308 1,943,487
Change in cash and cash equivalents 29,956 (221,314)
Cash and cash equivalents, beginning of period 1,461 222,775
Cash and cash equivalents, end of period 31,417 1,461
SUPPLEMENTAL INFORMATION:    
Income taxes paid in cash    1,900
Issuance of common stock dividends on preferred stock    284,116
Convertible debt exchanged for common stock 0 387,547
Debt and accrued interest exchanged for preferred stock 1,503,530 586,873
Fair value of common stock issued for services 467,964 354,547
Issuance of preferred stock for board fees 38,126 123,200
Warrant modifications    190,891
Beneficial conversion feature on convertible preferred stock 1,002,602   
Dividends earned on preferred stock $ 160,420 $ 27,584