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GOING CONCERN
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9 Months Ended | 12 Months Ended |
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Sep. 30, 2011
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Dec. 31, 2010
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| 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 nine
months ended September 30, 2011, the Company had current
liabilities that exceeded current assets by $6,111,788, has
incurred a net loss of $6,927,652, and used $1,015,288 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 September 30, 2011, the amount of
principal outstanding on notes payable for which the Company was in
default amounted to $2,209,377. Subsequent to September
30, 2011 and as of the date of these financial statements,
additional notes payable entered into events of default raising the
aggregate indebtedness in default to $2,734,116 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
DisintegratorPlus®. 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 nine months ended September 30,
2011, the Company secured $785,000 of new financings secured by
trade receivables and inventory, $155,000 of unsecured financing
and $155,000 from sales of its common stock and
warrants. 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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