Balance Sheet top

September 30,     December 31,       2009     2008   ASSETS                           CURRENT ASSETS             Cash and cash equivalents   $ 1,374,947     $ 868,208   Restricted cash     20,011       50,000   Accounts receivable     216,622       209,117   Inventories     735,235       571,831   Deposits     13,872       382,236   Prepaid income taxes     3,176       6,600   Prepaid expenses and other current assets     59,497       235,111   Total current assets     2,423,360       2,323,103   PROPERTY AND EQUIPMENT, NET     231,489       252,249                     OTHER ASSETS                 Intangible assets, net     243,184       279,658   TOTAL ASSETS   $ 2,898,033     $ 2,855,010                     LIABILITIES AND STOCKHOLDERS' EQUITY                                   CURRENT LIABILITIES                 Accounts payable   $ 137,068     $ 263,486   Accrued employee compensation     118,675       161,374   Accrued professional fees and other     300,483       278,982   Deferred revenue     144,170       16,705   Total current liabilities     700,396       720,547   LONG TERM LIABILITIES                 Deferred revenue     2,759       10,821   TOTAL LIABILITIES     703,155       731,368                     COMMITMENTS AND CONTINGENCIES (Note 4)                                   STOCKHOLDERS' EQUITY                 Preferred stock, $.01 par value; 1,000,000 shares authorized; 156,980 shares issued and outstanding on September 30, 2009 and 0 shares on December 31, 2008     1,570       -   Common stock, $.01 par value; 20,000,000 shares authorized; 2,195,283 shares issued and outstanding on September 30, 2009 and on December 31, 2008     21,953       21,953   Warrants to acquire preferred stock and common stock     882,253       -   Additional paid-in capital     8,328,872       6,803,530   Accumulated deficit     (7,039,770 )     (4,701,841 ) Total stockholders' equity     2,194,878       2,123,642   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 2,898,033     $ 2,855,010

Cash Flow Statement top

For the Nine Months Ended        September 30,                     2009     2008   CASH FLOWS FROM OPERATING ACTIVITIES:             Net loss to common shareholders   $ (1,848,128 )   $ (4,009,961 )                   Adjustments to reconcile net loss to operating cash flows:                 Depreciation and amortization     153,585       154,320   Stock-based compensation expense     351,439       451,279   Bad debt expense     45,280       -                     Changes in operating assets and liabilities:                 Restricted cash     29,989       -   Accounts receivable     (52,785 )     (55,966 ) Inventories     (163,404 )     (434,241 ) Deposits     368,364       438,973   Accounts payable     (126,418 )     169,221   Accrued employee compensation     (42,699 )     (6,138 ) Deferred revenue and other accrued expenses     140,904       1,927   Prepaid expenses and other current assets     179,038       (58,959 ) Net cash used in operating activities     (964,835 )     (3,349,545 )                   CASH FLOWS FROM INVESTING ACTIVITIES:                 Additions to property and equipment     (96,349 )     (131,957 ) Net cash used in investing activities     (96,349 )     (131,957 )                   CASH FLOWS FROM FINANCING ACTIVITIES:                 Net proceeds from the issuance of common stock     -       9,750   Net proceeds from the issuance of preferred stock     1,567,923       -   Net cash provided by financing activities     1,567,923       9,750                     Change in cash and cash equivalents     506,739       (3,471,752 ) Cash and cash equivalents, beginning of period     868,208       5,424,486   Cash and cash equivalents, end of period   $ 1,374,947     $ 1,952,734                     SUPPLEMENTAL INFORMATION:                 Income taxes paid   $ -     $ 2,790   Income tax refund received     623,262       49,798