GOING CONCERN

9 Months Ended

Sep. 30, 2011

GOING CONCERN [Abstract]

GOING CONCERN

For the year ended December 31, 2009, we did not have enough cash on hand to meet our current liabilities or to fund on-going operations beyond one year.  As a result, the report of independent registered public accounting firm included an explanatory paragraph in respect to the substantial doubt of our ability to continue as a going concern.

Our cash on hand as of September 30, 2011 is $1,464,264.  Since September 2010, we brought in $8,170,988 in funds through the sale of Preferred Stock, and our investors converted approximately $8,100,000 of convertible debt into common stock. In addition to the fundraising efforts, we intend to make capital expenditures necessary to increase our capacity and to reduce our cost per pound.

Over the last several years, the Company’s operations have been funded primarily through the sale of both equity and debt securities.  To successfully grow our business, our management believes it must improve our cash position through greater and sustainable sales of our product lines, and increase the productivity of the production process.  The Company has purchased equipment to increase production capacity and anticipates increased sales in the fourth quarter of 2011 and for fiscal 2012 based on current order levels from its customers and resulting from its ability to have the capacity to meet increased customer demand for its products.  However, such an increase would depend on sustained or increased levels of purchases by existing and new customers and actual realization of our customers’ current demand levels, as well as the completion of changes in our production process, all of which cannot be assured.

As of September 30, 2011, we have $1,904,000 worth of convertible notes that remain outstanding, and which come due in 2012.  If our note holders choose not to convert the notes, we will need to repay the notes, or reach an agreement with the note holders to extend the terms thereof.  If we are forced to repay the notes, this need for funds would have a material adverse impact on the Company's business, operations, financial condition and prospects, including its ability to operate as a going concern.  If we are forced to repay the notes, our current and forecasted levels of cash flows and available cash on hand will not be sufficient to fund our operations in 2012. Accordingly, we will be required to obtain additional financing in order to repay the notes, cover operating losses and working capital needs. We also have agreed to make available to with AVEKA Nutra Processing, LLC (“ANP”), part of the Aveka Group, a $500,000 line of credit for use financing ANP’s operating costs.  The extension of credit to ANP is anticipated to have a material adverse impact on the Company's cash resources.  We do not consider raising capital through an equity offering to be an attractive alternative to supplement working capital needs, given our current public equity valuation.  However, for the foregoing reasons we may find it necessary to raise additional capital in 2012. The Company cannot provide any assurances of the availability of future financing or the terms on which it might be available. In the absence of such financing, we may be forced to scale back or cease operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.