Quarterly report pursuant to Section 13 or 15(d)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Cash Flows for Operating Activities:    
Net (Loss) $ (1,807,272) $ (780,458)
Adjustments to reconcile net loss to net cash used by operating activities:    
Stock and warrants issued for services rendered 21,441 33,584
Finance costs paid in stock and warrants. 819,249 0
Amortization of deferred finance costs. 8,570 22,365
Amortization of bond discount. 286,341 63,830
Amortization of intangibles 484 484
Depreciation expense 34,566 15,097
Fair value adjustment of Derivative Liability. (379,315) 0
(Decrease) in deferred rent (63,653) (18,598)
Changes in assets and liabilities:    
(Increase) in inventories 0 (23,413)
(Increase) in prepaid expenses (27,277) (7,704)
(Increase) in security deposits (845) (635)
Increase in accounts payable 62,338 163,581
Increase in customer deposits 0 15,155
(Decrease) in deferred revenue 0 (7,500)
Increase in accrued liabilities 97,373 8,205
Net Cash (Used) by Operating Activities (948,002) (516,007)
Cash Flows from Investing Activities:    
Capital expenditures (3,500) (4,720)
Net Cash (Used) by Investing Activities (3,500) (4,720)
Cash Flow from Financing Activities:    
Proceeds of loan payable, related party 0 31,959
Proceeds of loan payable, other 57,000 0
Payment of Deferred Finance Costs (34,958) 0
Repayments of loan payable, related party 0 (14,000)
Proceeds of other borrowings 0 13,500
Payments of other borrowings (7,683) (3,038)
Proceeds from issuance of convertible debentures 757,000 114,500
Proceeds from sale of common stock and exercise of warrants 50,000 372,500
Net Cash Provided by Financing Activities 821,359 515,421
(Decrease) in Cash (130,143) (5,306)
Cash at Beginning of Period 225,696 15,603
Cash at End of Period 95,553 10,297
Cash paid during the period for:    
Interest 0 3,780
Income Taxes 0 50
Supplemental Disclosure of Non-Cash Investing and Financing Activities:    
Issued Convertible Debentures 757,000 114,500
Discount on Debentures 832,000 114,500
Several three year 1% convertible notes in the aggregate principal amount 155,100 196,000
Value of issuance of common stock in satisfaction of an obligation $ 0 $ 50,000