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, 2011
Dec. 31, 2010
Cash flows from operating activities:    
Net income (loss) $ 2,708,931 $ (568,505)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 97,011 82,879
Gain on revaluation of derivative (362,035) (483,081)
Amortization of debt discount 69,637  
Reduction in allowance for bad debts   (120,000)
Gain on extinguishment of debt and derivative liability (2,228,939)  
Common stock issued for services 80,550 186,252
Return of shares for services not rendered (65,000)  
Changes in certain assets and liabilities:    
Accounts receivable (391,937) 199,629
Inventories 3,668 (15,285)
Prepaid expenses and other assets 17,714 (66,594)
Deposits and other assets 5,937  
Accounts payable and accrued liabilities 362,749 68,189
Accrued interest 25,929 103,026
Due to related parties 51,960 269,871
Deferred revenues 529,731 305,442
Net cash provided by (used in) operating activities 905,906 (38,177)
Cash flows from investing activities:    
Purchases of equipment (40,653) (31,725)
Net cash used in investing activities (40,653) (31,725)
Cash flows from financing activities:    
Repayment of notes payable to related parties (25,000) (125,716)
Proceeds from notes payable to related party   45,000
Proceeds from convertible promissory note – related party 51,000  
Proceeds from promissory notes 550,000  
Repayment of promissory notes (550,000)  
Repayment of convertible debentures (735,000)  
Principal payment under capital lease obligations (26,875) (45,520)
Net cash used in financing activities (735,875) (126,236)
Net (decrease) increase in cash and cash equivalents 129,378 (196,138)
Cash and cash equivalents, beginning of year 104,344 300,482
Cash and cash equivalents, end of year 233,722 104,344
During the year, cash was paid for the following:    
Income taxes 0 0
Interest 15,145  
Capital lease obligations $ 35,677 $ 38,776