Quarterly report pursuant to Section 13 or 15(d)

CONSOLIDATED STATEMENTS OF CASH FLOWS

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
 6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (1,591,546) $ (1,707,976)
Adjustments to reconcile net loss to operating cash flows:    
Depreciation and amortization 77,025 99,904
Stock-based compensation expense 81,168 145,103
Warrant income relating to revaluation (84,021) 0
Bad debt expense 0 18,420
Changes in operating assets and liabilities:    
Short-term investments 0 (248,000)
Accounts receivable 74,879 (90,118)
Inventories (29,772) (216,121)
Deposits 0 (7,240)
Accounts payable 276,450 207,478
Accrued employee compensation 1,946 25,609
Deferred revenue and other accrued expenses (124,663) (39,341)
Prepaid expenses and other current assets 119,147 17,026
Net cash used in operating activities (1,199,387) (1,795,256)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Disposals/(Additions) to property and equipment 0 (24,310)
Net cash used in investing activities 0 (24,310)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from stock option exercise 43,980 0
Decrease in restricted cash 20,014 0
Proceeds from stock warrant exercise 0 1,421,275
Net proceeds from the issuance of preferred stock 816,963 465,867
Net cash provided by financing activities 880,957 1,887,142
Change in cash and cash equivalents (318,430) 67,576
Cash and cash equivalents, beginning of period 552,849 1,609,778
Cash and cash equivalents, end of period 234,419 1,677,354
SUPPLEMENTAL INFORMATION:    
Income taxes paid 1,900 1,900
Issuance of common stock dividend on preferred stock 76,017 194,011
Issuance of common stock warrants for services 0 18,122
Issuance of common stock for services 0 18,720
Series B dividend paid in cash 42,037 0
Beneficial conversion feature on convertible preferred stock $ 304,823 $ 154,389