Quarterly report pursuant to Section 13 or 15(d)

STATEMENT OF CASH FLOWS (unaudited)

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STATEMENT OF CASH FLOWS (unaudited) (USD $)
 9 Months Ended 30 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net (loss) $ (2,261,776) $ (1,657,598) $ (5,643,411)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation 40,774 5,450 60,481
Amortization 267,857   357,142
Bad debt expense   3,500 3,500
Non-cash expenses exchanged for services     1,694
Stock-based compensation 67,219 430,448 736,331
Changes in operating assets and liabilities      
Decrease (increase) in receivables 6,552 6,000 (27,399)
(Decrease) increase in prepaid and other current assets (30,224) (96,349) (80,592)
Increase in inventory (158,252) (47,815) (207,001)
(Decrease) increase in income taxes payable (75) 50 75
Increase in accounts payable 28,222 101,713 101,394
(Decrease) increase in accrued liabilities (36,528) 17,984 26,782
(Decrease) increase in interest payable   (8,055) 2,630
Cash used in operating activities (2,076,231) (1,244,672) (4,668,374)
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment 111,180 319,962 448,938
Acquisition of business     2,500,000
Cash used in investing activities (111,180) (319,962) (2,948,938)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from issuance of senior secured notes payable 1,000,000   2,500,000
Repayment of senior secured notes payable 250,018 1,500,000 1,750,018
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 1,520,000
Proceeds from issuance of Series D preferred shares 1,348,730   1,348,730
Proceeds from loan payable 83,507 142,010 225,797
Repayment of loan payable 20,346   29,260
Cash provided by financing activities 2,161,873 162,010 8,619,249
Net change in cash and cash equivalents (25,538) (1,402,624) 1,001,937
Cash and cash equivalents, beginning of period 1,027,475 2,794,937  
Cash and cash equivalents, end of period $ 1,001,937 $ 1,392,313 $ 1,001,937