Quarterly report pursuant to Section 13 or 15(d)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)
 6 Months Ended
Jun. 30, 2014
Jun. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (2,362,842) $ (1,845,410)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 39,731 40,421
Accretion of interest and amortization of debt issuance costs 393,845 260,753
Stock-based compensation expense 40,384 28,017
Non-cash third party fees 159,482 256,000
Change in fair value of derivative liability 255,406 (18,359)
Changes in operating assets and liabilities:    
Accounts receivable (43,090) (97,892)
Inventories (116,543) 56,722
Accounts payable 59,309 (116,597)
Accrued employee compensation (28,987) 9,168
Deferred revenue (13,702) (29,601)
Other accrued expenses and liabilities (98,560) 160,167
Prepaid expenses and other current assets (40,909) (19,973)
Net cash used in operating activities (1,756,476) (1,316,584)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property plant and equipment (7,139) (1,531)
Net cash used in investing activities (7,139) (1,531)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payment of related party debt (25,182) (46,778)
Net proceeds from convertible debt 420,434 640,500
Payments on convertible debt (303,100)   
Net proceeds from non-convertible debt 196,250   
Payments on non-convertible debt (172,360)   
Payment of preferred stock dividends    (60,000)
Net proceeds from the issuance of common stock 149,165  
Net proceeds from the issuance of preferred stock 1,476,360 896,595
Net cash provided by financing activities 1,741,567 1,430,317
Change in cash and cash equivalents (22,048) 112,202
Cash and cash equivalents, beginning of period 31,417 1,461
Cash and cash equivalents, end of period 9,369 113,663
SUPPLEMENTAL INFORMATION:    
Convertible debt exchanged for convertible preferred stock 270,000 1,018,000
Accrued dividends on preferred stock 54,593 71,410
Issuance of convertible preferred stock for interest 30,000 16,374
Issuance of convertible preferred stock for related party debt    25,200
Issuance of convertible preferred stock for board of director and other fees 92,750 54,126
Issuance of common stock for services    120,000
Deemed dividend on convertible preferred stock 1,388,062 651,182
Convertible debt exchanged for common stock 87,500   
Common stock issued for preferred dividends $ 58,268