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 $)
 9 Months Ended 165 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Net Loss $ (7,511,015) $ (6,583,448) $ (65,943,935)
Write off of intangible assets     505,000
Settlement of litigation and debt (114,903)   (1,277,223)
Settlement of debt due Morale/Matthews     927,903
Stock based compensation expense 919,289 206,263 4,854,445
Issuance of common stock for services 862,000 713,637 8,034,788
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 339,122 126,000 465,122
Increase in convertible notes related to default 2,376 35,313 298,855
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 4,796,647 3,179,799 15,861,278
Fair value of common stock and warrants issued to induce conversion of notes   168,340 469,043
Costs of private placement convertible notes   1,129,212 1,640,715
Change in fair value of derivative liability (2,722,084) (1,300,845) (2,828,749)
Amortization of deferred compensation     3,060,744
Loss on disposition of assets     14,426
Depreciation and amortization of leasehold improvements 25,735 25,844 485,917
Bad debt     1,300
Accounts receivable     (1,380)
Inventory 0 0 0
Prepaid expenses and other (28,908) (16,854) (58,253)
Other assets (2,310)   (10,330)
Accounts payable and accrued expenses 154,220 34,334 4,766,551
Accounts payable – license agreements (375,172) (146,723) (369,887)
Accounts payable – related parties (167,788) 37,477 (19,615)
Net cash used in operating activities (3,822,791) (2,391,651) (27,300,956)
Purchase of equipment (32,243) (11,235) (598,862)
Proceeds from sale of equipment     17,478
Net cash used in investing activities (32,243) (11,235) (581,384)
Net proceeds under equity line of credit     1,262,386
(Decrease) increase in payables to related parties and stockholder (86,947) (11,865) 536,979
Advances from founding executive officer     517,208
Net proceeds from issuance of convertible notes and warrants 3,831,430 2,390,376 15,036,408
Repayment of convertible notes     (282,121)
Proceeds from sale of stock and exercise of warrants and options 13,500 15,300 10,816,074
Net cash provided by financing activities 3,757,983 2,393,811 27,886,934
Net increase in cash (97,051) (9,075) 4,594
Cash, beginning of period 101,645 33,611  
Cash, end of period 4,594 24,536 4,594
Interest 11,713 16,485 171,079
Income taxes 800 800 7,482
Acquisition of intangible asset through advance from related party and issuance of common stock     505,000
Deferred compensation for stock options issued for services 862,000   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
Issuance of common stock in settlement of payable   4,121 247,584
Cancellation of stock     8,047
Conversion of accounts payable and accrued expenses to common stock     612,521
Conversion of accounts payable and accrued expenses to convertible debentures 301,075 281,199 632,275
Conversion of related party debt to convertible debentures   22,500 72,500
Conversion of convertible debentures to common stock 4,702,386 3,643,253 15,488,367
Issuance of shares for settlement of loans and other payables     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 7,500 30,000 67,500
Fair value of warrants and beneficial conversion feature associated with issued convertible notes $ 4,132,505 $ 1,450,450 $ 12,378,893