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 175 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Cash flows from operating activities      
Net Loss $ (11,538,652) $ (7,511,015) $ (80,828,119)
Adjustments to reconcile net loss to net cash used in operating activities:      
Write off of intangible assets       505,000
Settlement of litigation and debt (239,775) (114,903) (1,578,029)
Settlement of debt due Morale/Matthews       927,903
Stock based compensation expense 1,660,828 919,289 7,836,945
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 756,486 339,122 1,294,374
Increase in convertible notes related to default    2,376 299,274
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 3,587,802 4,796,647 19,721,879
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 2,856,087 (2,722,084) 727,886
Gain on extinguishment of derivative liabilities (1,463,487)    (1,463,487)
Amortization of deferred compensation       3,060,744
Loss on disposition of assets       14,426
Depreciation and amortization 27,879 25,735 522,778
Bad debt       1,300
Changes in operating assets and liabilities:      
Accounts receivable       (1,380)
Prepaid expenses and other 52,344 (28,908) (25,482)
Other assets    (2,310) (10,330)
Accounts payable and accrued expenses (200,853) 154,220 4,826,997
Accounts payable - license agreements 28,350 (375,172) (444,662)
Accounts payable and accrued expenses - related parties (65,539) (167,788) (95,539)
Net cash used in operating activities (3,310,280) (3,822,791) (31,512,397)
Cash flows from investing activities      
Purchase of equipment (15,067) (32,243) (613,929)
Proceeds from sale of equipment       17,478
Net cash used in investing activities (15,067) (32,243) (596,451)
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 1,831,440 3,831,430 18,396,488
Repayment of convertible notes       (296,397)
Proceeds from sale of stock and exercise of warrants and options 1,778,443 13,500 12,594,517
Net cash provided by financing activities 3,609,883 3,757,983 33,011,181
Net (decrease) increase in cash 284,536 (97,051) 902,333
Cash, beginning of period 617,797 101,645   
Cash, end of period 902,333 4,594 902,333
Supplemental disclosures of cash flow information      
Cash paid during the year for: Interest 720 11,713 172,100
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
Issuance of common stock in settlement of payable       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 46,240 301,075 683,715
Conversion of related party debt to convertible debentures       72,500
Conversion of convertible debentures to common stock 3,741,784 4,702,386 19,493,135
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       2,130,625
Proceeds of exercise of options applied to accounts payable    7,500 67,500
Fair value of warrants and beneficial conversion feature associated with issued convertible notes $ 1,877,680 $ 4,132,505 $ 15,790,413