2.4.0.8060300 - Disclosure - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIEStruefalsefalse1falsefalsefalsec20130101to20130630http://www.sec.gov/CIK0001052257duration2013-01-01T00:00:002013-06-30T00:00:001true1us-gaap_AccountingPoliciesAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse02false2us-gaap_SignificantAccountingPoliciesTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseverboseLabel1falsefalsefalse00<div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt; text-decoration: underline;"> NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Presentation of Interim Information</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The financial information at June 30, 2013 is unaudited, but includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial information set forth herein, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information, and with the instructions to Form 10-Q. Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.</div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The results for six months ended June 30, 2013 may not be indicative of results for the year ending December 31, 2013 or any future periods.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;"> Use of Estimates</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Revenue Recognition</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company generally recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. In instances where the final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. No provisions were established for estimated product returns and allowances based on the Company’s historical experience.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /><font style="display: inline; font-family: Times New Roman; font-size: 10pt; text-decoration: underline;">Allowance for Doubtful Accounts</font></div><div style="text-indent: 0pt; display: block;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Management of the Company makes judgments as to its ability to collect outstanding receivables and provide allowances for the portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided at differing rates, based upon the age of the receivable. In determining these percentages, management analyzes its historical collection experience and current economic trends. If the historical data the Company uses to calculate the allowance for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and the future results of operations could be materially affected.  As of June 30, 2013 and December 31, 2012 the allowance for doubtful accounts is $0.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Accounting for Derivative Instruments</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">All derivatives have been recorded on the balance sheet at fair value based on the lattice model calculation. These derivatives, including embedded derivatives in the Company’s warrants (and its formerly outstanding Convertible 8% Senior Secured Notes issued in 2008 through 2010 and preferred stock), which have reset provisions to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Lattice Valuation Model</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company valued the warrants and the conversion features in its formerly outstanding convertible notes and preferred stock using a lattice valuation model, with the assistance of a valuation consultant. The lattice model values these instruments based on a probability weighted discounted cash flow model. The Company uses the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the instruments are determined based on management's projections and the expert’s calculations. These probabilities are used to create a cash flow projection over the term of the instruments and determine the probability that the projected cash flow will be achieved. A discounted weighted average cash flow for each scenario is then calculated and compared to the discounted cash flow of the instruments without the compound embedded derivative in order to determine a value for the compound embedded derivative.</div><div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><div><div style="text-align: right; width: 100%; font-family: Times New Roman; font-size: 8pt;"></div></div></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Cash and cash equivalents</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. There was $479,312 in cash at June 30, 2013 and $644,804 at December 31, 2012.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Fair value of financial instruments</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, inventory, accounts payable and accrued liabilities. The estimated fair value of cash, accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.  None of these instruments are held for trading purposes.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company utilizes various types of financing to fund its business needs, including convertible debt with warrants attached. The Company reviews its warrants and conversion features of securities issued as to whether they are freestanding or contain an embedded derivative and, if so, whether they are classified as a liability at each reporting period until the amount is settled and reclassified into equity with changes in fair value recognized in current earnings. At June 30, 2013, the Company had warrants to purchase common stock, the fair values of which are classified as a liability.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Inputs used in the valuation to derive fair value are classified based on a fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="letter-spacing: 9pt;">   </font>-    Level one — Quoted market prices in active markets for identical assets or liabilities</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> <font style="letter-spacing: 9pt;">   </font> - <font style="display: inline; font-family: Times New Roman; font-size: 10pt;"><font style="letter-spacing: 9pt;"> </font>Level two — Inputs other than level one inputs that are either directly or indirectly observable; and</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="letter-spacing: 9pt;">   </font> - Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use</div></div><div style="text-align: center;"> </div></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the warrants to purchase common stock discussed above. The Company classifies the fair value of these warrants under level three. The fair value of the derivative liability at June 30, 2013 was $2,949,146 compared to $8,025,381 as of December 31, 2012.  The decrease in fair value for the six months ended June 30, 2013 was $497,187 compared to an increase of $2,887,993 for the six months ended June 30, 2012.  Below is a hierarchy table of the components of the derivative liability:</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="top" style="width: 28%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Carrying</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td colspan="3" valign="top" style="border-bottom: black 2px solid; width: 23%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Fair Value Measurements Using</div></td><td valign="top" style="border-bottom: black 2px solid; width: 2%; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 2%; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%; font-family: times new roman; font-size: 10pt;">  </td></tr><tr><td valign="top" style="width: 28%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Value</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Level 1</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Level 2</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Level 3</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Total</div></td></tr><tr><td valign="top" style="width: 28%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td></tr><tr bgcolor="#cceeff"><td align="left" valign="top" style="width: 28%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Derivative Liabilities</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td></tr><tr bgcolor="white"><td align="right" valign="top" style="width: 28%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">12/31/12</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $8,025,381</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $-</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $-</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $8,025,381</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $8,025,381</div></td></tr><tr bgcolor="#cceeff"><td valign="top" style="width: 28%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td></tr><tr bgcolor="white"><td align="left" valign="top" style="width: 28%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Change in derivative liabilities due to</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td></tr><tr bgcolor="#cceeff"><td align="left" valign="top" style="width: 28%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">       settlements</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (4,579,048)</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> -</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> -</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (4,579,048)</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (4,579,048)</div></td></tr><tr bgcolor="white"><td align="left" valign="top" style="width: 28%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Change in derivative liabilities valuation</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (497,187)</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> -</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> -</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (497,187)</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (497,187)</div></td></tr><tr bgcolor="#cceeff"><td valign="top" style="width: 28%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (5,076,235)</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> -</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> -</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (5,076,235)</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> (5,076,235)</div></td></tr><tr bgcolor="white"><td valign="top" style="width: 28%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td></tr><tr bgcolor="#cceeff"><td align="left" valign="top" style="width: 28%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Derivative Liabilities</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">  </td></tr><tr bgcolor="white"><td align="right" valign="top" style="width: 28%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6/30/13</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $2,949,146</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $-</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $-</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $2,949,146</div></td><td valign="top" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;">  </td><td align="right" valign="top" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"> $2,949,146</div></td></tr></table></div><div> </div><div style="text-align: center;"> </div><div style="font-family: Times New Roman; font-size: 10pt; text-decoration: underline;">Concentrations</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and therefore bear minimal risk.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Inventory</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Inventory is stated at the lower of cost or market, using the first-in, first-out method.  The Company follows standard costing methods for manufactured products.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Property and Equipment</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Property and equipment are stated at cost less accumulated depreciation.  Maintenance and repair costs are expensed as incurred.  Depreciation is calculated using the  straight-line method over the estimated useful lives of the assets. Estimated useful lives of five to ten years are used for machinery and equipment, office equipment and furniture, and automobile. Estimated useful lives of up to five years are used for computer equipment and related software. Depreciation and amortization of leasehold improvements are computed using the term of the lease.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Intangible Assets</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Intangible assets were carried at the purchased cost less accumulated amortization. Amortization was computed over the estimated useful lives of the respective assets, generally from fifteen to twenty years.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Impairment of Long-Lived Assets</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Income Taxes</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The amount of current and deferred taxes payable or refundable is recognized as of the date of the financial statements, utilizing currently enacted tax laws and rates.  Deferred tax expenses or benefits are recognized in the financial statements for the changes in deferred tax liabilities or assets between years.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Advertising Costs</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company expenses all advertising costs as incurred.  The amounts for the six months ended June 30, 2013 and 2012 were $250 and $4,998, respectively.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Income (Loss) Per Common Share</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares outstanding and, when diluted, potential shares from options and warrants to purchase common stock using the treasury stock method.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Cashless Exercise of Warrants/Options</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company has issued warrants to purchase common stock where the holder is entitled to exercise the warrant via a cashless exercise, when the exercise price is less than the fair value of the common stock. The Company accounts for the issuance of common stock on the cashless exercise of warrants on a net basis.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">Stock-Based Compensation</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company estimates the fair value of share-based payment awards made to employees and directors, including stock options, restricted stock and employee stock purchases related to employee stock purchase plans, on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods.  We estimate the fair value of each share-based award using the Black-Scholes option pricing model. The Black-Scholes model is highly complex and dependent on key estimates by management. The estimates with the greatest degree of subjective judgment are the estimated lives of the stock-based awards and the estimated volatility of the Company’s stock price. The Company recognized pre-tax compensation expense related to stock options of $1,435,467 and $459,972 for the six months ended June 30, 2013 and 2012, respectively.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt; text-decoration: underline;">New Accounting Pronouncements</div><div style="text-indent: 0pt; display: block;"> </div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Disclosures about Reclassification Adjustments out of Accumulated Other Comprehensive Income</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. The update requires entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The update was effective for the Company in the first quarter of 2013, but early adoption was permitted. The update primarily impacted our disclosures and did not have a material impact on our financial position, results of operations or cash flows.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Testing Indefinite-Lived Intangible Assets for Impairment</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In July 2012, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. The update was effective for the Company in the first quarter of 2013, but early adoption was permitted. The update may, under certain circumstances, reduce the complexity and costs of testing indefinite-lived intangible assets for impairment and did not have a material impact on the Company’s financial position, results of operations or cash flows.</div></div>falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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