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NYXIO TECHNOLOGIES CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) Forward-Looking Statements Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements." These forward-looking statements generally are identified by the words "believes," "project," "expects," "anticipates," "estimates," "intends," "strategy," "plan," "may," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Management's Discussion and Analysis of Financial Condition and Results of Operations Company Overview Through our wholly-owned subsidiary, Nyxio Technologies Inc., an Oregon corporation ("Nyxio"), we develop and provide technology for theentertainment and commercial markets within the consumer electronic industry. Since inception, the company's approach to the industry can be best described as disruptive evolution. The general population has evolved to the point where computers and devices that rely on an internal computer for operation have become second nature. Gone are the days when people were intimidated by their electronics. Consumer electronics continue to evolve and morph into new form factors. Touch cell phones, web tablets and now TV with browsers incorporated have become an accepted and expected part of our society. Nyxio's flagship product, The VioSphere, is the first TV with a fully functional personal computer built in. Unlike TVs with limited browser capabilities, the VioSphere has no limitations. Like many of the company's innovative products, it is an entertainment destination. This destination philosophy has become a driving force for product innovation and development, which, we believe, we provide at a reasonable cost. We are determined to become a leading-edge driver and developer of technology across a wide range of vertical markets that include retail, education, B2B, and digital signage. We strive to reduce the overall environmental footprint of end users by consolidating key hardware into more efficient devices. Products ·The Realm - All in One PC/TV, combining the latest in PC technology with HDTV. ·The Realm Pro - Robust all in One PC/TV geared for commercial and digital signage markets. ·Venture MMV - Mobile Media Viewer is a new class of video eyewear offering designer styling in a sleek ergonomic design with unmatched features and performance. ·The Vuzion - The world's first TV with Android OS built in enabling 400,000 Android applications on a TV for the first time. Sales and Marketing Nyxio Technologies has implemented a sales strategy that has proven to be an effective way to bring product to market. Regional rep firms across the country have been employed to represent Nyxio products to their existing base of dealers. These respected firms leverage relationships they have developed with dealers in their respective territories to add Nyxio products to their stable of product offerings. The firms also offer training, technical and logistics support to the dealers. The firms are compensated on a commission basis so their success is directly tied to the success of the products represented. This symbiotic relationship will allow Nyxio to introduce products nationally in a quick effective yet affordable manner. Nyxio is also working with its international distribution partners as we have found that many international markets are very receptive to new technology, especially in the consumer sector. 4 Table of Contents We are implementing a marketing plan for our platform of products. The key areas of the plan include public relations, advertising, website, trade shows, product identity, and social media. We believe that when executed successfully, our marketing plan will result in interest and attention within the Consumer Electronics Industry as well as with the end consumer. We have recently engaged a progressive agency which specializes in branding, advertising and marketing that we believe will be a great asset in this area and aid us in delivering a compelling story to our consumer. Public Relations - Pending the appropriate funding, we hope to accomplish the following goals through our public relations efforts: (i) Create buzz among key target audiences; (ii) Develop national brand recognition; (iii) Drive awareness for current products to support 2012 launches; (iv) Develop relationships with key influencers in the marketplace; (v) Introduce the Company to key analysts; (vi) Drive sales through a strategic public relations program, (vii) Educate our consumers to understand our differentiation and product versatility. Advertising - We will be creative with our advertising and use social media to innovatively create awareness and introduce our product lines. We will also place ads in industry-specific publications in order to introduce our product line to a large population of key companies and individuals within the consumer electronics industry. These companies and individuals represent regional and national electronics distributors as well as custom audio/video installers and retailers. The publications currently being considered for advertising placement include: · CE Pro · Smarthouse · GQ · Electronic House · First Glimpse · Connected World We are also be submitting our products for reviews in magazines like Good Housekeeping and GQ, building public awareness. We may use TV commercials as well as obtain a nationally recognized but local Portland personality to endorse and promote our product. Website - We have established a website that is a great source of information to the general population as well as distributors, retailers, and custom audio/video installation companies, all of whom are potential customers for the Company. We have also established the website as a platform for online gaming and as a social media tool. Our goal is for this website to grow as a vital resource for our employees, customers, and for the industry itself. Trade Shows - Trade shows are an effective marketing tool for us. We expect to participate in half a dozen trade shows annually, as well as private distributor sponsored shows. January 2012 represented our debut appearance at the Consumer Electronics Show (CES), a major milestone in our marketing process. The following trade shows serve to cover the identified target markets of electronics distributors, retailers, and the education market. · CES · CEDIA Expo · Digital Signage Expo · Engage · NAB Show · InfoComm 5 Table of Contents Innovative Product Development - Our product development efforts are based on the concept that market penetration is contingent upon continued innovation. We have proven our ability to be innovative with the release of the first VioSphere. This release came a full three years before the market, we believe, determined that connected TV's and smart TV's were the next consumer technology wave and are already into our 4th version of the VioSphere. Continued creativity in development has also been illustrated by our development and release of our Android TV and the Nyxio Venture MMV's. With continued focus on creative and innovative product development, we strive to become a leader in the consumer electronics industry. We are continuing along the path of technology convergence and reducing the environmental footprint, packing more features and components into easy to use products. Product Identity - Through the design of our products, we aim to distinguish ourselves in the market place and establish a reputation for innovative technology. We believe that this, combined with our unique designs, should give us an advantage over our competitors. Our designs will also serve to create more demand for our entire product line with our goal being that customers will be able to identify a Nyxio product before seeing the Nyxio name on it. Social Media - Social media is also a major focus for our marketing efforts. Our team will focus on maximizing our presence through Facebook, Twitter, digg, YouTube and email marketing. By maximizing our exposure through these various social media sites, we strive to effectively brand ourselves to millions of potential customers on a continual basis. Achievements to Date Our management team has spent the past year listening to user feedback and incorporating this feedback into our products. We have forged strong partnerships with our supply chain and our manufacturers, as well as formed a rep and dealer based sales network. We've also searched for and selected a progressive public relations and advertising firm and aligned ourselves with investor relations professionals who have the Company's financial health in heart. Over the past year, Nyxio has implemented its logistics plan by selecting an all in one international logistics expert, and we have contracted an internationally recognized customer service and repair company. We have also partnered with a number of unique distribution partners to increase our sales opportunities. These relationships include international distribution opportunities as well. To date Nyxio has released a number of innovative products which have been well received by the electronics industry and we recently released the first Android based smart television. Key Objectives Nyxio Technologies has identified three key objectives that will help guide Company growth for the next five years and beyond. These include: · Continue to determine competitive strategies, organizational management, and divisional structure for the Company's roadmap for growth. · Partnerships, in product development, supply chain, and sales, leveraging established expertise to innovate and create something new. · Multi-channel focus, with targeted solutions for home Consumer Electronics, B2B, Digital Signage, Education, Legal & Courtroom, Museums, etc. Nyxio's product development efforts are based on the concept that market penetration is contingent upon continued innovation. "Convergence" is our driving philosophy, combining technologies that already exist to make products that are more effective, more powerful, reduce environmental footprints and clutter, and are fun and easy to use. We feel we are well positioned to define the connected and smart TV market, through continued creativity in development and innovative products we are forging our own path as a unique leader in the electronics industry. In this demanding and competitive technology industry, Nyxio has intentionally designed a conservative sales and marketing plan, looking to ensure the achievement of corporate goals along with an solid ROI to investor/partners. Nyxio is looking beyond the short term to a long range revenue stream and profitability with a dominant market share within key niche segments. Our funding goals are to partner with like-minded investors who understand ourlong term focus. 6 Table of Contents Goals Nyxio Technologies has six achievable goals: · Company Growth · Profitability · Product Development · Fast Innovation · Market Penetration · Industry Expansion Results of operations for the three months ended March 31, 2013 and 2012, and for the period from July 8, 2010 (date of inception) through March 31, 2013. The discussion that follows is derived from our unaudited interim balance sheets and the unaudited statements of operations and cash flows for the three months ended March 31, 2013 and 2012 and for the period from inception (July 8, 2010) to March 31, 2013. Revenues, net Prior to July 2011, we were a private development stage company with minimal operating revenues and limited access to the capital required for the execution of our business plan. Our operating revenues during the quarter ended March 31, 2013 were $6,065 compared to $4,598 during the quarter ended March 31, 2012. Our inception to date revenues totaled $85,903 as of March 31, 2013. We recognize revenue when delivery has occurred, the sales price is fixed and collectability is reasonably assured. Ownership and title of our products pass to customers upon delivery of the products to customers. We record revenues, net of sales discounts. Cost of Sales Our cost of sales for the quarter ended March 31, 2013 was $1,445, compared to $3,071 for the quarter ended March 31, 2012. Cost of sales includes finished goods, assembly services, and cost to deliver our product. Cost of sales has remained consistent with the previous year comparable period. As we are able to increase our revenues, we expect our cost variables to decrease due to volume discounts. Gross Profit During the quarter ended March 31, 2013 our gross profit was $4,620, compared to a gross profit for the quarter ended March 31, 2012 of $1,527. Cost of our initial inventory assembly was high due to modifications in assembly techniques and testing, higher than normal freight costs, and higher raw material costs due to low volume purchasing. Freight costs were higher as a result of oversea assembly and a single port of entry. These costs will decrease as we assemble and distribute from strategically located warehouse facilities. We expect gross profits to normalize at 38% in the near-term and 40% in the long-term. Gross profit, as a percentage of sales, will also increase as we have a higher weighting of sales through direct distribution to our end customer. Expenses During the quarter ended March 31, 2013 we incurred $33,173 in operating expenses, compared to $383,905 for the quarter ended March 31, 2012. This decrease in operating expenses for March 31, 2013 compared to the same period in 2012 is attributable primarily to much lower salaries and wages, professional fees, consulting fees, promotional and marketing expenses, and travel and entertainment expenses during the quarter ended March 31, 2013 as compared to the quarter ended March 31, 2012. Salaries and wages were $20,487 for the quarter ended March 31, 2013, compared to $138,403 for the quarter ended March 31, 2012. Professional fees were $2,500 for the quarter ended March 31, 2013, compared to $108,884 for the quarter ended March 31, 2012. We incurred no consulting fees for the quarter ended March 31, 2013, compared to consulting fees of $30,188 for the quarter ended March 31, 2012. We expect professional fees to remain consistent for the remainder of2013. 7 Table of Contents During the quarter ended March 31, 2013, we incurred $149 in travel and entertainment expenses. By comparison, we incurred $32,884 in travel and entertainment expenses during the quarter ended March 31, 2012. This expense is expected to increase during the remainder of the year as we continue our product marketing and business development strategies. During the quarter ended March 31, 2013 we incurred $45 in promotional and marketing expense. By comparison, we incurred $31,060 in promotions and marketing during the quarter ended March 31, 2012. These costs include demonstration products, advertising, shipping samples to retailers and distributors, and promotion allowances for distributors and tradeshows which includes booth costs, and various other tradeshow costs. We expect this expense to increase over the remainder of the year. Other Income and Expense During the quarter ended March 31, 2013, we experienced a loss on the change in the value of a derivative liability in the amount of $48,839, financing costs of $3,250, interest expense of $10,357, and amortization of a beneficial conversion discount in the amount of $123,194. As a result of the new financing agreements entered into during the year ended December 31, 2012, we have incurred additional costs which are attributable to the terms of each agreement with respect to their variable conversion rights. Until such time the agreements are satisfied in full, we will continue to incur costs related to the valuation of these terms. Net Loss During the quarter ended March 31, 2013 we incurred a net loss of $214,403. By comparison, we incurred a net loss of $392,061 during the quarter ended March 31, 2012. The decrease in net loss of compared to the same quarter last year is primarily attributable to decreased operating expenses, offset by a substantial increase in other expenses related to our financing activities. Our financing activities included the issuance of various convertible debt agreements at variable conversion rates, cash advances from our CFO and the re-structuring of previously non-convertible debt with par value conversion terms. Since July 8, 2010, the inception date of Nyxio, through March 31, 2013, we have generated revenue of $85,903 and have incurred a net loss of $7,521,274. Our greatest challenges which have prohibited us from executing our business plan are as follows: º Lack of adequate funding to obtain a small inventory, establish a healthy PR campaign, recruit a world class management team, and fund future development to enhance current product features and new products to stay ahead of the technology curve. º Manufacturing in Asia - Too far away to monitor quality and suppliers without costly travel. º Lack of adequate funding to retain skilled sales team. Our current and future operations are focused on continuing to carry out our business plan through the marketing and continued development of our current products, including the VioSphere, Realm, RealmPro, Venture MMV technology and Vuzion Android TV, and our future products, continued development efforts, and the continued evaluation of potential strategic acquisitions and/or partnerships. Our operations to date have consisted primarily of the following: · Enhancing product features and aesthetics · Negotiations to reduce product cost and enhance quality · Building a reliable Bill of Material for all products and sourcing from established suppliers · Work with technology partners such as Avnet, Intel, and AMD, with whom we have collaboration agreements, to develop new CPU list of options and board options. To date we have not entered into any Purchase Orders with these partners. · Develop new products with alternate revenue streams, such as gaming and cloud commerce · Develop clear and concise marketing, sales, and specification literature and tools 8 Table of Contents Our efforts are directed at generating revenue through the sales of our current products, which are available for purchase at the following locations: Amazon.com, OrderBorder, Rapid Buyer, Focus, University Book Stores, Smith and Associates, Sterling Technology, and at our proprietary web-site. Key factors affecting our results of operations include capitalization, revenues, cost of revenues, operating expenses and income and taxation. Liquidity and Capital Resources As of March 31, 2013, we had cash and equivalents on hand of $191, and a working capital deficit of $1,225,067. We determined that our cash on hand and working capital were not sufficient to meet our current anticipated cash requirements. As such, we evaluated several options to obtain short term financing, as discussed below. While we hope to see a significant increase in revenue towards the latter part of the second quarter of 2012, we continued to rely on funds obtained through the issuance of debt and equity securities throughout 2012 and through 2013 to date. We may enter into further debt and equity agreements to fund operations and inventory requirements if management feels it is required.We anticipate our additional cash requirements to fund cost of goods sold and operations to be roughly $1.7 million dollars, at which point revenues from sales should be sufficient to fund inventory and operational expenses. Our operations to date have been primarily funded through the issuance of debtand equity securities. Specifically, on September 30, 2011, we entered into a promissory note with Coach Capital LLC in the amount of $111,000 (the "Coach Note"). The Coach Note is unsecured, bears interest at 10% per annum and is due on demand. The holder of the Coach Note may elect to convert all or part of the indebtedness owing under the Coach Note into our securities at such rate as that being offered to investors at the time of conversion. As of March 31, 2013, the unpaid principal balance together with accrued interest totaled $132,169 During the year ended December 31, 2011, we sold 3,456 (post-split) shares of our common stock to certain accredited investors in exchange for cash totaling $777,500 in accordance with our form of Securities Purchase Agreement. In the fourth quarter of 2011 we sold an additional 4,667 (post-split) shares of our common stock in exchange for cash totaling $210,000 in accordance with our form of Securities Purchase Agreement. On February 16, 2012, we entered into a Securities Purchase Agreement with and issued a Convertible Promissory Note in the amount of $200,000, at 6% interest per annum, to ICG USA, LLC (the "ICG Note"). The ICG Note is convertible into shares of our common stock beginning nine months after the date of issuance of the ICG Note at the discretion of ICG USA, LLC. Pursuant to the terms of the Agreement, the note is convertible at a rate equal to a 45% discount to the average of the three lowest closing trade prices in the preceding thirty trading days. During the year ended December 31, 2012, ICG elected to convert $32,743 in principal. Pursuant to the conversion rate calculation in the Agreement, we issued 13,634 (post-split) shares at an average conversion rate of $2.40 and recognized a loss on the derivative in the amount of $23,340.We have determined that the conversion feature of this note is not considered to be solely indexed to our own stock and is therefore not afforded equity treatment. In accordance with ASC 815, we have bi-furcated the conversion feature of the note and recorded a derivative liability. As of March 31, 2013 the value of the derivative liability was $136,847 and we recognized income on change in the value of the derivative of $7,410 for the quarter ended March 31, 2013. Additionally, on February 21, 2012, we entered into a securities purchase agreement (the "Purchase Agreement") with Socius CG II, Ltd.; a Bermuda exempted company ("Socius"). Under the terms and subject to the conditions of the Purchase Agreement, we have the right, in our sole discretion, over a term of two years from the closing of the Purchase Agreement, to demand through separate tranche notices that Socius purchase up to a total of $5 million of redeemable Series A Preferred Stock. In order to effectuate a future issuance of Series A Preferred Stock, on March 22, 2012, after receiving approval of a majority of our outstanding common stock, we filed an amendment to our Articles of Incorporation to designate 1,500 shares of blank check preferred stock, and on March 26, 2012, we filed a Certificate of Designations of Preferences, Rights and Limitations to authorize the issuance of 1,100 shares of Series A Preferred Stock. In our sole discretion, we have the right to issue to Socius, subject to the terms and conditions of the Purchase Agreement, one or more tranche notices to purchase a certain dollar amount of such Series A Preferred Stock. As of the date of this Quarterly Report, we have not provided Socius with a tranche notice and no Series A Preferred Stock has been issued. 9 Table of Contents On May 7, 2012, we entered into a $275,000 Promissory Note (the "Note") with JMJ Financial ("JMJ"). Under the Note, we received $50,000 in loan proceeds with JMJ. Additional sums up to a maximum total of $275,000 may be advanced in the sole discretion of JMJ. The Note includes a 10% original issue discount and is due in 1 year. The Note does not bear interest if paid in full within 90 days. Thereafter, a one-time interest charge of 5% shall be applied to the principal sum. The Note is convertible to common stock in whole or in part at conversion price equal to the lesser of $0.06 per share or 65% of the lowest trading price in the 25 trading days prior to the conversion. We received $50,000 in initial funding under the JMJ Note. JMJ elected to convert $7,735 in principal into 11,666 shares of our common stock. We have determined that the conversion feature of this note is not considered to be solely indexed to our own stock and is therefore not afforded equity treatment. In accordance with ASC 815, we have bifurcated the conversion feature of the notes and recorded a derivative liability. As of March 31, 2013 the value of the derivative liability was $25,450 and we recognized income on change in the value of the derivative of $5,588 for the quarter ended March 31, 2013. Subsequent to the reporting period, on April 24, 2013, we entered into an amendment of the Note. Under the Amendment, the 10% original issue discount was removed and replaced with a closing fee of 3% and a due diligence fee of 8% for all subsequent advances under the Note. Following the amendment to the JMJ Note and subsequent to the reporting period, we borrowed an additional $5,000 from JMJ. In addition, we have received debt financing from Asher Enterprises, Inc. under a series of Convertible Promissory Notes. The notes, both converted and outstanding as of March 31, 2013, are as follows: Shares issued upon Conversion Amount Issue date Due date conversion date(s) Principal amount$ 63,000 June 6, 2012 March 8, 2013 $ 63,000 7,246 12/17/12 (3,000 ) 7,059 12/31/12 (2,700 ) 6,991 01/14/13 (2,800 ) 7,029 01/16/13 (3,100 ) 7,029 01/18/13 (3,100 ) 16,187 03/01/13 (5,900 ) 16,187 03/08/13 (5,900 ) 25,231 03/15/13 (10,900 ) 27,322 04/25/13 (3,000 ) $ 22,600 July 10, $ 37,500 2012 April 12, 2013 Variable n/a $ 37,500 November, $ 40,000 13, 2012 August 15, 2013 Variable n/a $ 40,000 January 31, $ 37,500 2013 November 1, 2013 Variable n/a $ 37,500 April 11, $ 41,500 2013 January 16, 2014 Variable n/a $ 41,500 10 Table of Contents All Notes issued to Asher Enterprises, Inc. bear interest at a rate of 8% per year and are convertible at a conversion price equal to 55% of the Market Price of our common stock on the conversion date. For purposes of the Notes, "Market Price" is defined as the average of the 3 lowest closing prices for our common stock on the 10 trading days immediately preceding the conversion date. The number of shares issuable upon conversion of the Notes is limited so that the holder's total beneficial ownership of our common stock may not exceed 9.99% of the total issued and outstanding shares. This condition may be waived at the option of the holder upon not less than 61 days-notice. We have determined that the conversion feature of these notes is not considered to be solely indexed to our own stock and is therefore not afforded equity treatment. In accordance with ASC 815, we have bi-furcated the conversion feature and recorded a derivative in connection with these notes . As of March 31, 2013, we recognized a gain on derivatives in the amount of $40,724 resulting from the conversion of $37,400 of principal into 78,654 shares of our common at an average conversion rate of $0.4755 per share. On September 20, 2012, we received additional financing under a Convertible Promissory Note issued to Continental Equities, LLC ("Continental") in the amount of $35,000. The note bears interest at a rate of 8% per annum, is unsecured and matures on May 15, 2013. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 42.5% discount to the lowest three average thirty day trading prices prior to the conversion date. In addition, we entered into a Registration Rights Agreement with Continental under which, upon demand of Continental, we must register resale of the common shares issuable upon conversion of the Note on Form S-1. In addition, Continental has "piggy-back" registration rights, which require us to include the re-sale of shares issuable upon conversion of the Note in any registration statement we may file, except for registrations on Forms S-4 or S-8. We have determined that the conversion feature of these notes is not considered to be solely indexed to our own stock and is therefore not afforded equity treatment. In accordance with ASC 815, we have bi-furcated the conversion feature and recorded a derivative in connection with these notes. As of March 31, 2013, we recognized a gain on derivatives in the amount of $8,115 resulting from the conversion of $7,735 of principal into 21,481 shares of our common at an average conversion rate of $0.36 per share. On July 8, 2010, in connection with our reverse acquisition, we assumed a Promissory Note owed by Nyxio Technologies, LLC dated March 15, 2010 and issued to Chamisa Technology, LLC ("Chamisa"). The total principal and interest owing at the time we assumed the Note was $83,627. The Note bore interest at an annual rate of twelve percent (12%). From July of 2010 through December of 2010, additional advances were made under the Note in the principal amount of $64,491. In 2011, additional advances in the amount of $18,000 were made under the Note. On April 20, 2012, a portion of the balance due under the Note in the amount of $81,595 was assigned by Chamisa to Michelle Nelson, leaving total principal and interest due to Chamisa of $120,782. On April 25, 2012, we entered into an amendment of the Note portion purchased by Ms. Nelson. Under this amendment, Ms. Nelson agreed to forgive $56,595 of the principal balance in exchange for conversion rights on the remaining balance of $25,134. In accordance with the amendment, the remaining portion of the obligation was made convertible to common stock at $0.001 per share. Over the course of 2012, Ms. Nelson and various subsequent assignees converted the Nelson portion of the Note into common stock. As of March 31, 2013, the remaining portion of the Note still owing to Chamisa was $133,825, including principal and interest. Subsequent to the reporting period on May 7, 2013, Chamisa assigned the remaining portion of the Note still owing to Reign Investment Group, LLC. On May 15, 2013, we entered into an Amendment to the remaining portion of the Chamisa Note with Reign. Under the Amendment, Reign agreed to forgive $65,731.34 of the balance of the Note. This remaining balance due under the Note was made convertible to common stock at a price of $0.001 per share. In addition, we agreed to issue Reign 60,000 shares of common stock in connection with theamendment. 11 Table of Contents To meet our future objectives, we will need to meet our revenue objectives and/or sell additional equity and debt securities, which could result in dilution to current shareholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects. Our current cash requirements are significant due to planned development and marketing of our current products, and we anticipate generating losses. In order to execute on our business strategy, we will require additional working capital, commensurate with the operational needs of our planned marketing, development and production efforts. Our management believes that we should be able to raise sufficient amounts of working capital through debt or equity offerings, as may be required to meet our short-term obligations. However, changes in our operating plans, increased expenses, acquisitions, or other events, may cause us to seek additional equity or debt financing in the future. We anticipate continued and additional marketing, development and production expenses. Accordingly, we expect to continue to use debt and equity financing to fund operations for the next twelve months, as we look to expand our asset base and fund marketing, development and production of our products. There are no assurances that we will be able to raise the required working capital on terms favorable, or that such working capital will be available on any terms when needed. Any failure to secure additional financing may force us to modify our business plan. In addition, we cannot be assured of profitability in the future. Off Balance Sheet Arrangements As of March 31, 2013, there were no off balance sheet arrangements. Going Concern We have negative working capital, have incurred losses since inception, and have not yet received significant revenues from sales of products or services. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern. Our ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management's plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts. |