GOING CONCERN | 6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2011 | Dec. 31, 2010 | |
| GOING CONCERN |
2. GOING CONCERN
These
financial statements have been prepared assuming that the Company
will continue as a going concern. As of and for the six
months ended June 30, 2011, the Company had current liabilities
that exceeded current assets by $7,437,987, has incurred a net loss
of $6,142,744, and used $925,392 of cash in operating
activities. As reported in the December 31, 2010 audited
financial statements, the Company had current liabilities that
exceeded current assets by $5,149,524 as of December 31, 2010, and
had reported a net loss of $7,040,767 and used $896,346 of cash in
operating activities for the year ended December 31,
2010. In addition, the Company remains in default with
regard to payment of certain of its obligations. At June
30, 2011, the amount of principal outstanding on notes payable for
which the Company was in default amounted to
$2,040,377. Subsequent to June 30, 2011, additional
notes payable entered into events of default raising the aggregate
indebtedness in default to $2,275,377 as of the date of these
financial statements. These conditions raise operating
and liquidity concerns and substantial doubt about the Company's
ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result
from the outcome of this uncertainty. The
Company’s continued existence is dependent upon its ability
to successfully execute its business plan, secure additional
sources of liquidity and obtain accommodating credit terms from
vendors, note holders and other creditors. Should the
Company be unable to renegotiate the terms and conditions on its
debt obligations or is otherwise unable to pay its accounts payable
when due, the Company may incur materially higher interest and
other expenses, and the debt holders could foreclose on their
collateral and commence legal action against the Company to recover
amounts due which ultimately could require the disposition of some
or all of the Company’s assets. Any such action
may require the Company to curtail or cease
operations.
Operations
have been funded primarily by issuances of debt secured by trade
receivables and inventory, convertible debt, issuances of the
Company’s securities and revenue generated from sales of the
Company’s products. Current and future operations
are expected to be funded from sales of the Company’s
products and new investments. To the extent that any
excess cash is generated from operations, it has been, and will
continue to be, used for the payment of debt and other trade
obligations. Management believes that, based on the
anticipated level of sales, and continued support through
reasonable and accommodating credit terms from vendors, debt
holders and other creditors, the Company can continue operating in
the short-term. Over the last three years, the Company
used proceeds from debt financings and sales of shares of its
common stock to develop and distribute the Company’s VeraTemp
Non-Contact Thermometer and the Disintegrator
Plus®. Proceeds from any future sales of the
Company’s securities are also expected to be used primarily
for product development, distribution and operating
expenses. During the second quarter of 2011, the Company
secured $785,000 of new financings secured by trade receivables and
inventory, and $50,000 from sales of its common
stock. The Company may continue to offer its securities
as payment for services and other obligations.
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2. GOING CONCERN
These
financial statements have been prepared assuming that the Company
will continue as a going concern. As of and for the year
ended December 31, 2010, the Company had current liabilities that
exceeded current assets by $5,149,524, has incurred a net loss of
$7,040,767, and used $896,346 of cash in operating
activities. In addition, the Company is in default with
regard to payment of certain of its obligations. At
December 31, 2010, the amount of principal outstanding on notes
payable for which the Company was in default amounted to
$1,492,887. Further, the Company is subject to
litigation which could adversely impact its
operations. These conditions raise operating and
liquidity concerns and substantial doubt about the Company's
ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result
from the outcome of this uncertainty. The
Company’s continued existence is dependent upon its ability
to successfully execute its business plan, secure additional
sources of liquidity and obtain accommodating credit terms from
vendors, note holders and other creditors. Should the
Company be unable to renegotiate the terms and conditions on its
debt obligations or is otherwise unable to pay its accounts payable
when due, the Company may incur materially higher interest and
other expenses, and the debt holders could foreclose on their
collateral and commence legal action against the Company to recover
amounts due which ultimately could require the disposition of some
or all of the Company’s assets. Any such action
may require the Company to curtail or cease
operations.
Operations
have been funded primarily by issuances of convertible debt,
issuances of the Company’s securities and revenue generated
from sales of the Company’s products. Current and
future operations are expected to be funded from sales of the
Company’s products and new investment. To the
extent that any excess cash is generated from operations, it has
been, and will continue to be, used for the payment of debt and
other trade obligations. Management believes that, based
on the anticipated level of sales, and continued support through
reasonable and accommodating credit terms from vendors, debt
holders and other creditors, the Company can continue operating in
the short-term. Over the last three years, the Company
used proceeds from the sales of convertible notes, short-term loans
and sales of shares of its common stock to develop the
Company’s Vera Temp Non-Contact Thermometer and the
Disintegrator Plus®. Proceeds from any future sales
of the Company’s securities are also expected to be used
primarily for product development and operating
expenses. In July 2010, the Company secured credit
facilities to finance purchases of product and to factor accounts
receivable. The Company may continue to offer its
securities for payment of services and other
obligations.
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