Annual report pursuant to Section 13 and 15(d)

CONSOLIDATED STATEMENTS OF CASH FLOWS

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Cash Flows from Operating Activities:    
Net income (loss) $ 390,080 $ (1,902,239)
Adjustments to reconcile net income (loss) from operations to cash (used in) provided by operating activities:    
Amortization of debt discounts and financing costs    191,357
Gain on sale of product line (15,408) (829,296)
Gain on derivative liability    (172,476)
Impairment of goodwill    3,100,000
Gain on disposal of property and equipment    (2,165)
Provision for lease loss 132,174 59,937
Stock based compensation expense 201,643 168,887
Depreciation of property and equipment 19,150 26,896
Amortization of intangible assets 241,680 241,680
Provision for doubtful accounts 7,637 (51,070)
Increase / decrease in:    
Accounts receivable (1,727,733) (455,756)
Inventories (332,702) 156,488
Prepaid expenses (32,214) 5,662
Accounts payable 718,644 (1,154,564)
Accrued liabilities and expenses 33,665 225,320
Deferred revenue 62,027 4,264
Customer deposits 97,399 (78,406)
Deferred lease liability 14,973 35,834
Net Cash Used In Operating Activities (188,985) (429,647)
Cash Flows From Investing Activities:    
Purchase of property and equipment (43,095)   
Proceeds from disposal of property and equipment    6,645
Withdrawal (deposit) of restricted cash 91,000 (91,000)
Proceeds from sale of product line    1,000,000
Net Cash Provided By Investing Activities 47,905 915,645
Cash Flows From Financing Activities:    
Proceeds from issuance of note payable    700,000
Payments on note payable (61,253) (84,800)
Payments on note payable - related party    (25,114)
Proceeds from issuance of redeemable preferred stock    1,355,000
Proceeds from exercise of warrants 405,000   
Repayment of convertible debentures    (1,606,023)
Net Cash Provided by Financing Activities 343,747 339,063
Net increase in cash and cash equivalents 202,667 825,061
Cash and cash equivalents at the beginning of the year 961,091 202,667
Cash and cash equivalents at the end of the year 1,163,758 961,091
Supplemental Disclosures of Cash Flow Information:    
Cash paid during the year for interest 18,320 181,262
Cash paid during the year for income taxes 28,729  
Non-cash transactions:    
Issuance of note payable in conjunction with warrant cancellation    50,000
Beneficial conversion feature of redeemable convertible preferred stock    427,895
Value of warrants issued with redeemable convertible preferred stock    427,895
Accretion of discount on redeemable preferred stock 625,574 440,019
Accretion of dividends on redeemable preferred stock 272,064 259,876
Retirement of derivative liability related to warrant obligation    (570,569)
Conversion of preferred stock to common stock    $ 375,000