Quarterly report pursuant to sections 13 or 15(d)

3. Accrued Liabilities (Tables)

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3. Accrued Liabilities (Tables)
 9 Months Ended
Sep. 30, 2013
Payables and Accruals [Abstract]  
Other accrued liabilities
    9/30/2013     12/31/2012  
Allowance for Sales Returns   $ 43,000     $ 53,000  
Distribution Arrangements Payable     105,064       217,858  
Deferred Revenue     41,581       110,177  
Royalties Payable     3,817       59,033  
Other Accrued Expenses     6,171       56,594  
Total Accrued Expenses   $ 199,633     $ 496,662  
Derivative liability activity

Derivative liability activity for the nine months ending September 30, 2013 was as follows:

 

    September 30, 2013     December 31, 2012    

(Gain) Loss on Derivative,

9 Months Ending
September 30, 2013

  
Conversion feature of the June 27, 2012 $1,000,000 Securities Purchase Agreement (see note 4)   $ –     $ 15,743     $ (4,113 )
Conversion feature of the June 27, 2012 reissued 1,163,333 Securities Purchase Agreement (see note 4)     2,030,636       –       1,067,798  
5,000,000 Warrants     –       49,491       (18,527 )
380,952 Warrants     9,604       3,728       5,876  
Total   $ 2,040,240     $ 68,962     $ (1,051,034 )
Fair market values of the Company's derivatives

Fair market values of the Company's derivatives as of September 30, 2013 were based on the Black Scholes valuation using the following assumptions:

 

    Conversion Feature   Warrants  
Risk-free interest rate   0.14%   0.79%  
Expected life in years   .83   3.83  
Dividend yield   0   0  
Expected volatility    63.00%   60.54%