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LIQUIDITY AND CAPITAL RESOURCES

6 Months Ended

Jun. 30, 2013

Liquidity and Capital Resources Disclosure [Abstract]

LIQUIDITY AND CAPITAL RESOURCES

2.

LIQUIDITY AND CAPITAL RESOURCES

The Company has incurred net losses of approximately $2.3 million and $5.7 million for the six months ended June 30, 2013 and 2012, respectively. In addition, the Company had a stockholders’ deficit balance of approximately $9.9 million at June 30, 2013 and $7.7 million at December 31, 2012. Furthermore, the Company’s current forecast for fiscal 2013 projects a significant net loss and projects a need to raise additional capital to fund operations beyond 2013. The Company continues to explore strategic alternatives to finance its business plan, including but not limited to, private equity or debt financings or other sources, such as strategic partnerships. The Company is also focusing on increasing sales of its products to generate cash flows to fund its operations.

In May 2013, the Company borrowed $5.0 million from an affiliate of the Company under a Subsequent Term Note. See Note 6 – Note Payable – Related Parties for additional information. Proceeds from this note will be used for working capital requirements and for repaying other long-term liabilities.

The Company will need to raise additional capital in the fourth quarter of 2013 and beyond, and such capital may not be available at that time or on favorable terms, if at all. The Company may seek to raise these funds through public or private equity offerings, debt financings, credit facilities, or partnering or other corporate collaborations and licensing arrangements. If adequate funds are not available or are not available on acceptable terms, the Company’s ability to fund its operations, take advantage of opportunities, develop products and technologies, and otherwise respond to competitive pressures could be significantly delayed or limited, and operations may need to be downsized or halted.

There can be no assurance that the Company will be successful in its plans described above or in attracting alternative debt or equity financing. These conditions have raised substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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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