Annual report pursuant to Section 13 and 15(d)

CONSOLIDATED BALANCE SHEETS

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CONSOLIDATED BALANCE SHEETS (USD $)
Dec. 31, 2011
Dec. 31, 2010
Current assets    
Cash and cash equivalents $ 2,460,000 $ 7,033,000
Receivables 333,000 1,018,000
Inventory 151,000 0
Restricted cash 330,000 0
Prepaid expenses and other current assets 39,000 70,000
Total current assets 3,313,000 8,121,000
Property and equipment, net 51,000 32,000
Patents, net 362,000 574,000
Other assets 59,000 44,000
Total assets 3,785,000 8,771,000
Current liabilities    
Accounts payable 1,713,000 2,984,000
Accrued expenses 857,000 857,000
Dividends payable 6,487,000 4,443,000
Accrued interest payable 98,000 126,000
Debt, current portion 2,750,000 5,500,000
Current portion of deferred revenue 285,000 347,000
Total current liabilities 12,190,000 14,257,000
Derivative liability - warrants 1,507,000 5,087,000
Derivative liability - preferred stock 4,430,000 5,840,000
Long-term deferred revenue 3,264,000 4,382,000
Total liabilities 21,391,000 29,566,000
Commitments and contingencies      
Stockholders' deficit    
Convertible preferred stock - $.01 par value; authorized 2,000,000 shares; 2,938.3617 issued at December 31, 2011; 2,978.3617 issued at December 31, 2010 0 0
Common stock - $.01 par value; authorized 100,000,000 shares; issued 23,890,787 at December 31, 2011; issued 19,115,010 at December 31, 2010 239,000 191,000
Additional paid-in capital 237,600,000 230,153,000
Treasury stock, at cost - 163 shares (4,000) (4,000)
Accumulated deficit (255,441,000) (251,135,000)
Total stockholders' deficit (17,606,000) (20,795,000)
Total liabilities and stockholders' deficit $ 3,785,000 $ 8,771,000