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## RESULTS OF OPERATIONS – YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010 

## CONSOLIDATED INCOME STATEMENT 

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During the year ended December 31, 2012, the Company’s revenue decreased by 11% or $621,000 to $5,165,000 from $5,786,000 and cost of goods sold increased by 7% or $178,000 to $2,716,000 from $2,538,000 in comparison with the same period of 2011. 

These changes resulted in a decrease in gross margin by 25% or $799,000 to $2,449,000 from $3,248,000. Income from operations has decreased by $1,091,000 to loss of $506,000 from income of $585,000. 

There was a net loss in the year ended December 31, 2012 of $538,000 in comparison with net income in the same period of 2011 of $578,000. 

During the fourth quarter of 2012, the Company’s revenue decreased by 23% or $350,000 to $1,202,000 from $1,552,000 and cost of goods sold increased by 21% or $135,000 to $769,000 from $634,000 in comparison with the same period of 2011. These changes resulted in a decrease in gross margin by 53% or $485,000 to $433,000 from $918,000. 

Income from operations has decreased by $476,000 to loss of $249,000 from income of $227,000 during the fourth quarter of 2012 in comparison with the same period of 2011. 

There was a net loss in the fourth quarter of 2012, $237,000 in comparison with net income of $252,000 in the same period of 2011 mostly due to a decrease in gross margin. 

