Annual report pursuant to section 13 and 15(d)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)
12 Months Ended 178 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Cash flows from operating activities      
Net Loss $ (13,092,387) $ (10,856,547) $ (82,381,854)
Adjustments to reconcile net loss to net cash used in operating activities:      
Write off of intangible assets       505,000
Settlement of litigation, accounts payable and debt (239,775) (175,934) (1,578,029)
Settlement of debt due Morale/Matthews       927,903
Fair value of employee stock based compensation 2,070,426 2,240,961 8,246,543
Issuance of common stock for services 1,228,250 862,000 9,263,038
Issuance of options for legal settlement       31,500
Issuance of warrants for legal settlement       4,957
Issuance of warrants for financing fees       153,501
Issuance of warrants for consulting fees 641,747 411,888 1,179,635
Increase in convertible notes related to default    2,795 299,274
Interest on related party loans       22,305
Patent acquisition cost       1,610,066
Amortization of issuance costs and original issue debt discounts including beneficial conversion feature-part of interest expense 3,620,092 5,069,446 19,754,169
Fair value of common stock and warrants issued to induce conversion of notes       469,043
Costs of private placement convertible notes       1,640,715
Change in fair value of derivative liability 4,023,094 (2,021,536) 1,894,893
Gain on extinguishment of derivative liabilities (2,445,095)    (2,445,095)
Amortization of deferred compensation       3,060,744
Loss on disposition of assets       14,426
Depreciation and amortization of leasehold improvements 36,077 34,717 530,976
Bad debt       1,300
Changes in operating assets and liabilities:      
Accounts receivable       (1,380)
Prepaid expenses and other 37,775 (48,481) (40,051)
Other assets    (2,310) (10,330)
Accounts payable and accrued expenses (192,796) 415,519 4,835,054
Accounts payable - license agreements 137,725 (478,297) (335,287)
Accounts payable and accrued expenses - related parties (342,718) (178,173) (372,718)
Net cash used in operating activities (4,517,585) (4,723,952) (32,719,702)
Cash flows from investing activities      
Purchase of equipment (16,142) (32,243) (615,004)
Proceeds from sale of equipment       17,478
Net cash used in investing activities (16,142) (32,243) (597,526)
Cash flows from financing activities      
Net proceeds under equity line of credit       1,262,386
(Decrease) increase in payables to related parties and stockholder    (86,947) 536,979
Advances from founding executive officer       517,208
Net proceeds from issuance of convertible notes and warrants 1,835,840 5,360,070 18,400,888
Repayment of convertible notes    (14,276) (296,397)
Proceeds from sale of stock and exercise of warrants and options 3,681,881 13,500 14,497,955
Net cash provided by financing activities 5,517,721 5,272,347 34,919,019
Net increase in cash 983,994 516,152 1,601,791
Cash, beginning of period 617,797 101,645   
Cash, end of period 1,601,791 617,797 1,601,791
Supplemental disclosures of cash flow information      
Cash paid during the year for: Interest 7,640 21,294 179,020
Cash paid during the year for: 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     505,000
Deferred compensation for stock options issued for services     3,202,931
Purchase of property and equipment financed by advance from related party     3,550
Conversion of related party debt to equity     515,000
Cancellation of stock     8,047
Conversion of accounts payable and accrued expenses to common stock   4,121 860,105
Conversion of accounts payable and accrued expenses to convertible debentures 52,371 331,200 689,846
Conversion of related party debt to convertible debentures   27,500 72,500
Conversion of convertible debentures to common stock 3,789,634 4,417,417 19,540,985
Issuance of shares for settlement of loans and other payable to Morale/Matthews     2,783,711
Write off of deferred compensation     142,187
Fair value of derivative liability recorded as note discount   1,243,625 2,130,625
Proceeds of exercise of options applied to accounts payable   37,500 67,500
Fair value of warrants and beneficial conversion feature associated with issued convertible notes $ 1,888,211 $ 2,305,311 $ 15,800,944