Capital required to continue operations and substantial doubt about ability to continue operations
The Company requires capital to continue operations. The Company is in arrears with its creditors and any of its creditors may petition the Company in receivership. In this regard, management is planning to raise necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.
The Company has attempted to raise $5 million to $10 million in equity in 2011, which would be used to fund operations, improve working capital and to reduce maturing and past due debt. Should the Company be unable to raise this amount of capital its operating plans to fund our business and financial performance could be adversely affected. As of the date of this filing, the Company has not been successful in obtaining this equity.
On April 20, 2012, the Company received proceeds of $70,000 from the issuance of a $70,000 convertible promissory note to Dynamic, the Company’s controlling stockholder. The note bears interest at 5%, is due April 20, 2013, and is convertible into Company common stock at a variable conversion price equal to 80% of the market price (as defined) for the ten trading days prior to the conversion date.
From January 1, 2012 to May 9, 2012, the Company issued a total of 300,512,263 shares of its common stock to three convertible note holders in satisfaction of debt totaling approximately $430,000.
The Company has yet to fully commercialize its technologies and consequently has incurred significant losses since its inception. The Company has executed a Letter of Intent with Kool Telecom Ltd. and we expect that this will represent our future business activities if the merger is successful.
At December 31, 2011, the Company’s deficit accumulated during the development stage was approximately $71,962,476 and the Company had utilized cash in operating activities of $29,199,495. The Company has funded these losses and cash flows through the sale of equity securities, the issuance of debt and from credit granted by vendors. The Company is also in arrears to certain creditors and in default under certain agreements which may have a material adverse effect on operations.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will be available to the Company when needed, or if available, will be available on favorable terms in the amounts required by the Company. If the Company is unable to obtain adequate capital resources to fund operations, it may be required to delay, scale back or eliminate some or all of its operations, which may have a material adverse effect on the Company’s business, results of operations and ability to continue as a going concern.
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