2.4.0.8109 - Disclosure - Liquidity, Going Concern and Management's Planstruefalsefalse1falsefalsefalseP01_01_2013To06_30_2013http://www.sec.gov/CIK0001476638duration2013-01-01T00:00:002013-06-30T00:00:001true1rackd_GoingConcernDisclosureAbstractrackd_falsenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse02false2rackd_GoingConcernDisclosureTextBlockrackd_falsenadurationfalsefalsefalsefalsefalsefalsefalsefalseverboseLabel1falsefalsefalse00 <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif "> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <strong>Note 2 – Liquidity, Going Concern and Management’s Plans</strong></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> The Company has incurred substantial recurring losses since its inception. The Company’s current strategy is to raise capital and invest that capital in such a way that the Company rapidly grows its market share and revenues, eventually resulting in profits and cash from operations. However, this strategy has required a rapid build-up of infrastructure that initially exacerbated the Company’s operating deficit and use of cash in operations, because the expected revenue expansion will lag the investment in infrastructure. The capital that the Company has raised, and likely will continue to raise, will be used to invest in infrastructure, to fund development of the software product, to fund incremental legal and accounting costs associated with being a public company and to fund the Company’s operating deficit and general working capital requirements.</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> During the six months ended June 30, 2013 and the twelve months ended December 31, 2012, the Company generated approximately $<font style=" FONT-SIZE: 10pt">1,486,000</font> and $<font style=" FONT-SIZE: 10pt">4,561,000</font> in cash from financing activities, respectively, from factoring its receivables and from private offerings of common stock, warrants and debt funding. This capital has permitted the Company to continue its investment in product development and has provided working capital for the Company to win a modest amount of new business throughout the first six months of 2013. However, the amount of new business generated did not support the Company’s increased infrastructure and due to cash constraints the Company was forced to reduce costs until such time that either the anticipated level of revenue materializes or the Company raises sufficient additional capital.</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <font style="COLOR: black">During the six months ended June 30, 2013 and 2012, the Company recorded net losses of approximately $<font style=" FONT-SIZE: 10pt">3,244,000</font> and $<font style=" FONT-SIZE: 10pt">4,901,000</font>, respectively. Through cost reduction measures, the Company decreased its net loss during the six months ended June 30, 2013 despite revenues decreasing to approximately $<font style=" FONT-SIZE: 10pt">964,000</font> from approximately $<font style=" FONT-SIZE: 10pt">1,877,000</font> in the prior period. During the six months ended June 30, 2013 and 2012, the Company used cash in operating activities of approximately $<font style=" FONT-SIZE: 10pt">1,332,000</font> and $<font style=" FONT-SIZE: 10pt">3,283,000</font>, respectively. As of June 30, 2013, the Company had limited cash of approximately $<font style=" FONT-SIZE: 10pt">162,000</font>, a working capital deficiency of approximately $<font style=" FONT-SIZE: 10pt">8,368,000</font>, an accumulated deficit of approximately $<font style=" FONT-SIZE: 10pt">46,724,000</font> and owes approximately $<font style=" FONT-SIZE: 10pt">1,377,000</font> for payroll tax liabilities, penalties and interest which has yet to be remitted to the taxing authorities.</font> The IRS has placed federal tax liens that aggregate to approximately $<font style=" FONT-SIZE: 10pt"><font style=" FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: transparent">771,000</font></font></font> against the Company in connection with the unpaid payroll taxes through the third quarter of 2012.</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">   </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <font style="COLOR: black">Subsequent to June 30, 2013, the Company completed one closing of a private placement offering in which the Company sold $190,925 of units at a price of $<font style=" FONT-SIZE: 10pt">10,000</font> per unit. Each unit consists of (i) $<font style=" FONT-SIZE: 10pt">10,000</font> principal amount of one year, <font style=" FONT-SIZE: 10pt">12</font>% secured convertible promissory notes and (ii) a five-year warrant to purchase <font style=" FONT-SIZE: 10pt">267</font> shares of common stock at a price of $<font style=" FONT-SIZE: 10pt">3.00</font> per share at any time after the maturity date of the notes. On August 14, 2013, the Company borrowed $250,000 via a short-term interest free loan from an affiliate. The loan is intended to convert into the Units Offering. The capital raised in the private placement offering will be utilized to fund existing operating deficits while the Company continues to develop product line(s) and enhance marketing efforts to increase revenues and eventually generate operating surpluses. The Company believes it will be successful in these efforts; however, there can be no assurance the Company will meet its revenues forecasts or, if necessary, be successful in raising additional debt or equity financing to fund its operations on terms agreeable to the Company. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern. The Company expects that the cash it has available will fund its operations only until September 2013.</font> If <font style="COLOR: black">the Company</font> is unable to obtain additional financing on a timely basis and, notwithstanding any request <font style="COLOR: black">the Company</font> may make, <font style="COLOR: black">the Company’s</font> debt holders do not agree to convert their notes into equity or extend the maturity dates of their notes, <font style="COLOR: black">the Company</font> may have to delay note and vendor payments and/or initiate cost reductions, which would have a material adverse effect on <font style="COLOR: black">the Company’s</font> business, financial condition and results of operations, and ultimately <font style="COLOR: black">the Company</font> could be forced to discontinue its operations, liquidate, and/or seek reorganization under the U.S. bankruptcy code.</div> </div> falsefalsefalsenonnum:textBlockItemTypenaGoing Concern DisclosureNo definition available.false0falseLiquidity, Going Concern and Management's PlansUnKnownUnKnownUnKnownUnKnowntruefalsefalseSheethttp://www.CK0001476638.com/role/LiquidityGoingConcernAndManagementsPlans12