Annual report pursuant to Section 13 and 15(d)

STATEMENT OF CASH FLOWS

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STATEMENT OF CASH FLOWS (USD $)
 12 Months Ended 33 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $ (3,068,701) $ (2,440,538) $ (6,450,336)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation expense 57,763 19,182 77,470
Amortization expense 357,143 89,285 446,428
Bad debt expense   3,500 3,500
Non-cash expenses exchanged for services     1,694
Stock-based compensation 216,083 456,998 885,195
Changes in operating assets and liabilities      
Decrease (increase) in receivables 11,751 (24,451) (22,200)
Increase in prepaid and other current assets (24,518) (56,368) (80,886)
Increase in inventory (97,369) (48,749) (146,118)
(Decrease) increase in income taxes payable (50) 50 100
Increase in accounts payable 3,856 73,172 77,028
Increase in accrued liabilities 6,091 43,310 69,401
(Decrease) increase in interest payable (818) (7,891) 1,812
Cash used in operating activities (2,538,769) (1,892,500) (5,136,912)
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment 27,674 334,338 365,432
Acquisition of business     2,500,000
Cash used in investing activities (27,674) (334,338) (2,865,432)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from advance payment 73,359   73,359
Proceeds from issuance of unsecured notes payable 90,000   90,000
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
Repayment of senior subordinated notes payable 500,000   500,000
Proceeds from issuance of common shares     4,000
Proceeds from exercise of options   300,000 300,000
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   142,290 142,290
Repayment of loan payable 30,239 8,914 39,153
Cash provided by financing activities 1,731,832 453,376 8,189,208
Net change in cash and cash equivalents (834,611) (1,773,462) 186,864
Cash and cash equivalents, beginning of period 1,021,475 2,794,937  
Cash and cash equivalents, end of period $ 186,864 $ 1,021,475 $ 186,864