Annual report pursuant to Section 13 and 15(d)

CONSOLIDATED STATEMENTS OF CASH FLOWS

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Cash flows from operating activities:    
Net income (loss) $ 4,449,000 $ (10,532,000)
Adjustments to reconcile net income (loss) to net cash Provided by (used in) operating activities:    
(Gain) on change in fair value of derivative-warrants (271,000) (1,236,000)
(Gain) loss on change in fair value of derivative-preferred stock (8,010,000) 4,770,000
Warrant extension expense 0 2,316,000
Gain on negotiated payables 0 (241,000)
Depreciation and amortization 3,000 419,000
Stock option compensation expense 439,000 390,000
Stock issued to directors and employees 167,000 305,000
Stock and warrants issued for services 111,000 77,000
Change in operating assets and liabilities:    
Receivables 766,000 (507,000)
Inventory 194,000 (43,000)
Prepaid expenses and other current assets 174,000 (212,000)
Restricted cash 0 330,000
Other assets 10,000 17,000
Accounts payable and accrued expenses (1,176,000) 567,000
Dividends payable 279,000 319,000
Accrued interest payable 0 (98,000)
Deferred revenue 2,866,000 (596,000)
Net cash provided by (used in) operating activities 1,000 (3,955,000)
Cash flows from investing activities:    
Capital expenditures (2,000) (13,000)
Net cash used in investing activities (2,000) (13,000)
Cash flows from financing activities:    
Payment of debt 0 (2,750,000)
Proceeds from exercise of stock options 29,000 0
Proceeds from preferred stock issuances, net of costs 0 4,654,000
Net cash provided by financing activities 29,000 1,904,000
Net increase (decrease) in cash and cash equivalents 28,000 (2,064,000)
Cash and cash equivalents at beginning of year 396,000 2,460,000
Cash and cash equivalents at end of year 424,000 396,000
Supplemental cash flow information:    
Cash paid for interest 0 388,000
Supplemental disclosure of noncash transactions    
Shares issued for dividends on preferred stock 0 22,000
Preferred stock dividends in dividends payable 2,898,000 1,999,000
Dividends payable exchanged for preferred stock $ 0 $ 5,297,000