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Liquidity and Capital Resources

6 Months Ended

Jun. 30, 2013

Notes to Financial Statements

2. Liquidity and Capital Resources

The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding revenue.

The Company intends to finance its activities through:

·

completing the Merger with North South,

·

managing current cash and cash equivalents on hand from our past equity offerings,

·

seeking additional funds raised through the sale of additional securities in the future,

·

increasing revenue from inventory and asset sales, the monetization of its patent portfolios, license fees, and new business ventures.

Working capital was $2,643,825 and $3,975,324 at June 30, 2013 and December 31, 2012, respectively and, cash on hand was $3,019,894 and $4,498,237, respectively. In addition, on August 16, 2013, the Company obtained the approval a majority of our shareholders necessary to complete the Merger with North South. Closing of the Merger is subject only to the expiration of the statutory twenty (20) calendar day period, which will expire on September 2, 2013. At closing, the Company will be relieved of $500,000 of indebtedness through an interparty cancellation of the North South Note, and the North South cash balance (a minimum of $2.0 million) will become available for the operations of the Company. The Company used the proceeds of the North South Note to fund certain expenses incurred in connection with the North South Merger.

Management believes that the approval that the Company received to complete the acquisition of North South is currently critical to the realization of its business plans. Management anticipates that the acquisition of North South will enable the Company to improve its financial condition and provide opportunities to for the Company to generate revenue and operating cash flows by monetizing North South’s portfolio of patents.

Management does not foresee any circumstances that would preclude the Company from completing the Merger upon the completion of the required waiting period. Notwithstanding management’s expectation, management further believes that should the Company not consummate the Merger with North South that the Company sufficient resources to continue its current operations through at least July 1, 2014, which would include the Company pursuing its current intention to either merger with or acquire one or more businesses with the intention of increasing our shareholder value.

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

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