Quarterly report pursuant to Section 13 or 15(d)

STATEMENT OF CASH FLOWS (unaudited)

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STATEMENT OF CASH FLOWS (unaudited) (USD $)
 6 Months Ended 27 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net (loss) $ (1,542,936) $ (1,055,716) $ (4,924,571)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation 26,256 775 45,963
Amortization 178,571   267,856
Bad debt expense   3,500 3,500
Non-cash expenses exchanged for services     1,694
Stock-based compensation 49,693 355,247 718,805
Changes in operating assets and liabilities      
Increase in receivables (30,203) (29,199) (64,154)
Increase (decrease) in prepaid and other current assets 1,408   (48,960)
Increase in inventory (149,623) (62,474) (198,372)
Increase (decrease) in income taxes payable (100) 50 50
Increase in accounts payable 160,109 198,976 233,281
Increase (decrease) in accrued liabilities (60,082) 1,076 3,228
(Decrease) increase in interest payable   (658) 2,630
Cash used in operating activities (1,366,907) (588,423) (3,959,050)
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment 7,332 75,689 345,090
Acquisition of business     2,500,000
Cash used in investing activities (7,332) (75,689) (2,845,090)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from issuance of senior secured notes payable 990,087   2,490,087
Proceeds from issuance of senior subordinated note payable     1,000,000
Proceeds from issuance of common shares     4,000
Proceeds from exercise of options     300,000
Proceeds from issuance of Series A preferred shares     500,000
Proceeds from issuance of Series B preferred shares     3,000,000
Proceeds from issuance of Series C preferred shares     1,520,000
Loan proceeds from equipment loan payable     142,290
Loan repayment of equipment loan payable 13,519   22,433
Repayment of senior secured notes payable     1,500,000
Cash provided by financing activities 976,568   7,433,944
Net change in cash and cash equivalents (397,671) (664,112) 629,804
Cash and cash equivalents, beginning of period 1,027,475 2,794,937  
Cash and cash equivalents, end of period 629,804 2,130,825 629,804
Cash paid for interest 49,643 119,342 392,878
Cash paid for income taxes 100   300
Dividend payable in accrued expenses $ 47,591   $ 47,591