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 $)
 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (3,321,892) $ (2,518,624)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 59,364 62,955
Accretion of interest and amortization of debt issuance costs 611,919 391,625
Stock-based compensation expense 46,770 120,248
Non-cash third party fees 206,226 396,525
Change in fair value of derivative liability 156,799 (349,472)
Changes in operating assets and liabilities:    
Accounts receivable (187,406) 15,351
Inventories (115,847) 71,894
Accounts payable (16,976) 1,857
Accrued employee compensation 13,826 46,177
Deferred revenue 117,486 (30,854)
Other accrued expenses and liabilities 4,977 258,806
Prepaid expenses and other current assets 222,041 (27,611)
Net cash used in operating activities (2,202,713) (1,561,123)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property plant and equipment (7,139) (55,052)
Net cash used in investing activities (7,139) (55,052)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payment of related party debt, net (6,394) (45,736)
Net proceeds from convertible debt 957,744 896,503
Payments on convertible debt (303,100) (5,968)
Net proceeds from non-convertible debt 270,252   
Payments on non-convertible debt (267,377)   
Payment of preferred stock dividends    (60,000)
Net proceeds from the issuance of common stock 149,166   
Net proceeds from the issuance of preferred stock 1,476,360 896,595
Net cash provided by financing activities 2,276,651 1,681,394
Change in cash and cash equivalents 66,799 65,219
Cash and cash equivalents, beginning of period 31,417 1,461
Cash and cash equivalents, end of period 98,216 66,680
SUPPLEMENTAL INFORMATION:    
Convertible debt exchanged for convertible preferred stock 270,000 1,018,000
Accrued dividends on preferred stock 97,955   
Issuance of convertible preferred stock for interest 30,000   
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   
Issuance of common stock for services    320,000
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 $ 82,231