Quarterly report pursuant to sections 13 or 15(d)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)
6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Cash flows from operating activities:    
Net income $ 2,818,184 $ (387,426)
Adjustments to reconcile net income to net cash provided by operating activities    
Depreciation and amortization 52,312 42,492
Amortization of debt discount 44,136  
Gain on extinguishment of debt and derivative liability (2,228,939)  
Other   4,500
Gain on revaluation of derivative liability (362,035) (182,756)
Return of shares for services not rendered (65,000)  
Changes in assets and liabilities:    
Accounts receivable (241,437) 71,135
Inventory   (21,035)
Prepaid expenses and other current assets 37,369 (30,152)
Accounts payable and accrued expenses 135,862 303,770
Accrued interest 34,107 25,840
Deferred revenue 323,971 (12,753)
Due to related parties 48,095 167,840
Net cash provided by (used in) operating activities 596,625 (18,545)
Cash flows from investing activities:    
Purchase of property and equipment (29,562) (43,881)
Net cash used in investing activities (29,562) (43,881)
Cash flows from financing activities:    
Proceeds from convertible promissory note – related party 51,000  
Proceeds from promissory notes 550,000  
Repayment of promissory notes (50,000)  
Repayment of related party loans   (52,612)
Repayment of convertible debentures (735,000)  
Repayment of capital leases obligations (11,216) (10,025)
Net cash used in financing activities (195,216) (62,637)
Net increase in cash and cash equivalents 371,847 (125,063)
Cash and cash equivalents – beginning of period 104,344 300,482
Cash and cash equivalents – end of period 476,191 175,419
Cash paid during period for:    
Interest expense 0 0
Income taxes $ 0 $ 0