Quarterly report pursuant to Section 13 or 15(d)

CONSOLIDATED STATEMENT OF CASH FLOWS

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
 3 Months Ended 36 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Mar. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $ (1,344,276) $ (816,365) $ (7,794,612)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation expense 21,775 13,034 99,245
Amortization of intangible asset 89,285 89,285 535,713
Amortization of discount on notes payable 21,086   21,086
Impairment of goodwill 390,659   390,659
Bad debt expense     3,500
Stock-based compensation and other non-cash expense 129,408 19,322 1,016,297
Changes in operating assets and liabilities      
Decrease (increase) in receivables (1,145) 11,251 (23,345)
Increase in prepaid and other current assets (7,056) (48) (87,942)
Increase in inventory (119,236) (13,891) (265,354)
(Decrease) increase in accounts payable (23,080) 87,819 53,948
(Decrease) increase in accrued liabilities (145,158) 16,620 (73,845)
Cash used in operating activities (987,738) (592,973) (6,124,650)
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment 13,772 6,276 379,204
Cash from acquisition of subsidiary 3,355   3,355
Acquisition of business     2,500,000
Cash used in investing activities (10,417) (6,276) (2,875,849)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from advance payment     73,359
Proceeds from issuance of unsecured notes payable 1,000,000   1,090,000
Proceeds from issuance of senior secured notes payable     2,500,000
Repayment of senior secured notes payable     1,750,018
Proceeds from issuance of senior subordinated note payable     1,000,000
Repayment of senior subordinated notes payable 250,000   750,000
Proceeds from issuance of common shares     4,000
Proceeds from exercise of options     300,000
Proceeds from issuance of preferred shares, net 153,996   6,522,726
Proceeds from loan payable     142,290
Repayment of loan payable 10,457 6,737 49,610
Cash provided by (used in) financing activities 893,539 (6,737) 9,082,747
Net change in cash and cash equivalents (104,616) (605,986) 82,248
Cash and cash equivalents, beginning of period 186,864 1,027,475  
Cash and cash equivalents, end of period $ 82,248 $ 421,489 $ 82,248