Quarterly report pursuant to sections 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 174 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Cash flows from operating activities      
Net Loss $ (6,867,948) $ (5,259,261) $ (76,157,415)
Write off of intangible assets 0 0 505,000
Settlement of litigation and debt (223,774) (65,363) (1,562,028)
Settlement of debt due Morale/Matthews 0 0 927,903
Stock based compensation expense 1,245,736 565,248 7,421,853
Issuance of common stock for services 520,000 120,000 8,554,788
Issuance of options for legal settlement 0 0 31,500
Issuance of warrants for legal settlement 0 0 4,957
Issuance of warrants for financing fees 0 0 153,501
Issuance of warrants for consulting fees 207,926 127,064 745,814
Increase in convertible notes related to default 0 1,877 299,274
Interest on related party loans 0 0 22,305
Patent acquisition cost 0 0 1,610,066
Amortization of issuance costs and original issue debt discounts including beneficial conversion feature-part of interest expense 2,813,959 3,783,405 18,948,036
Fair value of common stock and warrants issued to induce conversion of notes 0 0 469,043
Costs of private placement convertible notes 0 0 1,640,715
Change in fair value of derivative liability 167,575 (1,563,584) (1,960,626)
Gain on extinguishment of derivative liabilities (85,576) 0 (85,576)
Amortization of deferred compensation 0 0 3,060,744
Loss on disposition of assets 0 0 14,426
Depreciation and amortization of leasehold improvements 18,329 16,651 513,228
Bad debt 0 0 1,300
Changes in operating assets and liabilities:      
Accounts receivable 0 0 (1,380)
Prepaid expenses and other 40,557 (24,083) (37,269)
Other assets 0 (2,310) (10,330)
Accounts payable and accrued expenses 35,137 115,992 5,062,987
Accounts payable - license agreements 68,975 (656,422) (404,037)
Accounts payable and accrued expenses - related parties (276,218) (164,993) (306,218)
Net cash used in operating activities (2,335,322) (3,005,779) (30,537,439)
Cash flows from investing activities      
Purchase of equipment (12,773) (30,951) (611,635)
Proceeds from sale of equipment 0 0 17,478
Net cash used in investing activities (12,773) (30,951) (594,157)
Cash flows from financing activities      
Net proceeds under equity line of credit 0 0 1,262,386
(Decrease) increase in payables to related parties and stockholder 0 (23,483) 536,979
Advances from founding executive officer 0 0 517,208
Net proceeds from issuance of convertible notes and warrants 1,326,740 3,393,430 17,891,788
Repayment of convertible notes 0 0 (296,397)
Proceeds from sale of stock and exercise of warrants and options 463,450 13,500 11,279,524
Net cash provided by financing activities 1,790,190 3,383,447 31,191,488
Net (decrease) increase in cash (557,905) 346,717 59,892
Cash, beginning of period 617,797 101,645  
Cash, end of period 59,892 448,362 59,892
Supplemental disclosures of cash flow information      
Interest 331 9,875 171,711
Income taxes 800 800 8,282
Non-cash investing and financing activities      
Acquisition of intangible asset through advance from related party and issuance of common stock 0 0 505,000
Deferred compensation for stock options issued for services 0 0 3,202,931
Purchase of property and equipment financed by advance from related party 0 0 3,550
Conversion of related party debt to equity 0 0 515,000
Issuance of common stock in settlement of payable 0 0 247,584
Cancellation of stock 0 0 8,047
Conversion of accounts payable and accrued expenses to common stock 0 0 612,521
Conversion of accounts payable and accrued expenses to convertible debentures 33,740 295,635 671,215
Conversion of related party debt to convertible debentures 0 0 72,500
Conversion of convertible debentures to common stock 2,732,501 3,696,417 18,483,852
Issuance of shares for settlement of loans and other payable to Morale/Matthews 0 0 2,783,711
Write off of deferred compensation 0 0 142,187
Fair value of derivative liability recorded as note discount 0 0 2,130,625
Proceeds of exercise of options applied to accounts payable 0 7,500 67,500
Fair value of warrants and beneficial conversion feature associated with issued convertible notes $ 1,360,480 $ 3,689,066 $ 15,273,213