Quarterly report pursuant to Section 13 or 15(d)

CONSOLIDATED STATEMENT OF CASH FLOWS

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (2,987,448) $ (2,261,776)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation expense 67,560 40,774
Amortization of intangible asset 267,856 267,857
Amortization of discount on notes payable 130,701  
Impairment of goodwill 390,659  
Stock-based compensation and other non-cash expense 209,854 67,219
Changes in operating assets and liabilities    
(Increase) decrease in receivables (7,539) 6,552
(Increase) decrease in prepaid and other current assets (12,468) (30,224)
(Increase) decrease in inventory (56,207) (158,252)
Increase (decrease) in accounts payable 38,790 28,222
Increase (decrease) in accrued liabilities (277,823) (36,603)
Cash used in operating activities (2,236,065) (2,076,231)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment 25,719 27,673
Cash from acquisition of subsidiary 3,355  
Cash used in investing activities (22,364) (27,673)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from issuance of unsecured notes payable 2,149,003  
Proceeds from issuance of senior secured notes payable   1,000,000
Repayment of senior secured notes payable   250,018
Repayment of senior subordinated notes payable 500,000  
Proceeds from issuance of preferred shares, net 509,963 1,348,730
Repayment of loan payable 31,667 20,346
Cash provided by (used in) financing activities 2,127,299 2,078,366
Net change in cash and cash equivalents (131,130) (25,538)
Cash and cash equivalents, beginning of period 186,864 1,027,475
Cash and cash equivalents, end of period $ 55,734 $ 1,001,937