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Going Concern and Management's Liquidity Plans
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements  
Going Concern and Management's Liquidity Plans
2. Going Concern and Management’s Liquidity Plans

Since inception, the Company has financed its operations primarily through product sales to customers and debt and equity financing agreements. As of December 31, 2011, the Company had negligible cash and a working capital deficiency of $2,404,464.  During the year ended December 31, 2011, the Company generated revenues of $10,363,293, however and incurred a net loss of $5,712,199.  During the year ended December 31, 2011, the Company generated $2,285,905 in net cash from financing activities, however, the Company used net cash in operating and investing activities of $2,799,580, and $883,868, respectively.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management believes that the Company has taken certain steps to improve its operations and cash flows, including improved inventory purchasing and an increase in the number of suppliers. In addition, with the acquisition of Hocks.com (see Note 15) the Company increased its revenues and its gross margin.  Management believes that these actions will increase its chances for success; however, there can be no such assurance.

As further discussed in Note 9, on October 17, 2011, the Company raised approximately $1,000,000 from the sale of 10,000 shares of Series C preferred stock which was used to reduce certain of the Company’s debt obligations. Subsequent to December 31, 2011, as discussed in Note 16, the Company received advances from certain shareholders aggregating $545,000 (of which $205,000 has been repaid as of the date of this report) and the repayment of employee advances aggregating $235,000 (see Note 12). In addition, the Company received proceeds from the sale of common stock in the amount of $175,010 and from the exercise of stock options in the amount of $26,662. The Company recognizes it will need to raise additional capital in order to reduce its debt, meet operations and execute its business plan. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
 
Accordingly, the accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.