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Management's consideration of going concern matters
3 Months Ended
Mar. 31, 2012
Managements Consideration of Going Concern Matters [Abstract]  
Managements Consideration of Going Concern Matters [Text Block]

Note 2: Management's consideration of going concern matters

 

The accompanying 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. However, the Company has sustained substantial loses from operations in recent years, and such losses have continued through the unaudited quarter ended March 31, 2012.

 

At March 31, 2012, we had cash and cash equivalents of $1,933,000, a decrease of $1,123,000 from December 31, 2011. The Company has incurred net losses since inception, including a net loss of $1,544,000 during the quarter ended March 31, 2012 and had an accumulated deficit of approximately $115,055,000 at March 31, 2012.

 

Based upon management's projections, we will require additional capital to continue commercialization of the Company’s power and water technologies (the “Technologies”) and to support current operations. The Company had a working capital deficit of $5,752,000 at March 31, 2012. Any change to management projections will increase or decrease this deficit. In addition, the Company may be subject to tax liens if it cannot abide by the terms of the Offer in Compromise approved by the Internal Revenue Service to satisfactorily settle outstanding payroll tax liabilities (see Note 8). Management is considering several alternatives for mitigating these conditions.

 

These uncertainties raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time. The financial statements included in this Form 10-Q have been prepared on a going concern basis and as such do not include any adjustments that might result from the outcome of this uncertainty.

 

Management successfully completed a program to eliminate the Company’s outstanding secured debt in 2011 and is actively seeking to raise substantial capital through additional equity or debt financing that will allow the Company to operate until it becomes cash flow positive from operations. Management is also actively pursuing commercial contracts to generate operating revenue. Management has determined that the financial success of the Company is largely dependent upon the Company’s ability to collaborate with financially sound third parties to pursue projects involving the Technologies.

 

As more fully described in Note 6, on January 10, 2012, the Company received proceeds totaling $498,000, net of issuance costs, from the exercise of an aggregate of 5,633,344 warrants at an exercise price of $0.095 per share.