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, 2013
Dec. 31, 2012
Cash Flows from Operating Activities:    
Net (loss) income $ (3,994,731) $ 390,080
Adjustments to reconcile net (loss) income from operations to cash provided by (used in) operating activities:    
Gain on sale of product line (41,902) (15,408)
Provision for lease loss 0 132,174
Stock based compensation expense 89,565 201,643
Depreciation 16,837 19,150
Amortization 241,680 241,680
Provision for doubtful accounts 197,151 7,637
Deferred income taxes 335,275 0
Goodwill impairment 2,774,016 0
Changes in assets and liabilities:    
Accounts receivable 1,169,200 (1,727,733)
Inventories (284,470) (332,702)
Prepaid expenses 18,663 (32,214)
Accounts payable (123,441) 718,644
Accrued liabilities & expenses (344,890) 33,665
Deferred revenue (6,265) 62,027
Customer deposits (41,358) 97,399
Deferred lease liability (2,689) 14,973
Net Cash Provided By (Used In) Operating Activities 2,641 (188,985)
Cash Flows From Investing Activities:    
Purchase of property and equipment (25,577) (43,095)
Deposit of restricted cash (382,000) 91,000
Net Cash (Used In) Provided By Investing Activities (407,577) 47,905
Cash Flows From Financing Activities:    
Payments on note payable (186,150) (61,253)
Proceeds from exercise of warrants 0 405,000
Net Cash (Used In) Provided By Financing Activities (186,150) 343,747
Net (decrease) increase in cash and cash equivalents (591,086) 202,667
Cash and cash equivalents at the beginning of the year 1,163,758 961,091
Cash and cash equivalents at the end of the year 572,672 1,163,758
Cash transactions:    
Cash paid during the year for interest 29,064 18,320
Cash paid during the year for income taxes 9,967 28,729
Non-cash transactions:    
Accretion of discount on redeemable preferred stock 705,170 625,574
Accretion of dividends on redeemable preferred stock 200,807 272,064
Conversion of preferred stock to common stock $ 2,681,878