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Going Concern and Management's Liquidity Plans
9 Months Ended
Sep. 30, 2011
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 September 30, 2011, the Company had $213,143 in cash and a working capital deficiency of $273,950 which represent decreases of $1,184,440 and $1,332,934 from December 31, 2010, respectively.  During the nine months ended September 30, 2011, the Company generated revenue of $7,587,513 and a net loss of $3,508,231.  For the nine months ended September 30, 2011, cash flows included net cash used in operating activities of $2,166,516, net cash used in investing activities of $910,450 and net cash provided by financing activities of $1,892,526.

Management believes that the Company has taken certain steps to improve its operations and cash flows, including improved inventory management and an increase in the number of suppliers. The acquisition of Hocks.com (see note 11) is also expected to improve the operating productivity and efficiency of the Company’s expenditures for selling, general and administrative activities. Further the Company has taken additional steps to increase the profitability derived from the acquisition of Hocks.com including significantly increasing the gross margin while decreasing the amounts spent on rent and payroll related expenses. Management believes that this plan will be successful, but there can be no such assurance.
 
As disclosed in Note 13, subsequent to September 30, 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 the Company’s debt. However, the Company recognizes it will need to raise additional capital in order to 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 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.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. 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 financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.