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Management?s Liquidity Plans
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements  
Managements Liquidity Plans

 

2. Management’s Liquidity Plans

Since inception, the Company has financed its operations primarily through product sales to customers, debt and equity financing agreements, and advances from stockholders. As of March 31, 2012 and December 31, 2011, the Company had negligible cash and a working capital deficiency of $4,479,571 and $2,404,464, respectively.  For the three months ended March 31, 2012, cash flows included net cash used in operating activities of $177,395, net cash used in investing activities of $81,043 and net cash provided by financing activities of $258,401. 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, during 2011, the Company significantly increased its revenues and improved its gross margin. Management believes that these steps will increase its chances for success; however, there can be no such assurance.

During the three months ended March 31, 2012, the Company received advances of $375,000 from certain stockholders and repaid $63,812 of such advances. In addition, the Company received $125,000 in cash during the quarter for common stock which has been included in shares issuable on the condensed consolidated balance sheet at March 31, 2012, as the shares were not issued by that date. 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 condensed 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 condensed consolidated financial statements do not necessarily represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.