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Convertible Preferred Stock
Convertible Preferred Voting and Non-voting Equity stock will have par terms, preferences and conversion features as determined by the Board of Directors at the time of the issuance of any such shares. In July 2003, the Board of Directors executed and filed a Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock with the State of Colorado, which authorized the issuance of 2,352,948 shares of Series A convertible preferred stock. Each unit is convertible into one share of common stock. In April 2004, the Board of Directors executed and filed a Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock with the State of Colorado, which authorized the issuance of 130 units of Series B convertible preferred stock. Each unit is convertible into 29,412 shares of common stock. In March 2005, the Board of Directors executed and filed a Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock with the State of Colorado, which authorized the issuance of 5,000 units of Series C convertible preferred stock. Each unit is convertible into approximately 909 shares of common stock.
As reflected in the accompanying condensed consolidated financial statements, the Company has losses from operations, negative cash flows from operations and a working capital deficit. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company's ability to continue to raise capital and generate positive cash flows from operations. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence.
In the first three months of 2005, management has taken the following steps that it believes will be sufficient to provide the Company with the ability to continue in existence:
The Company has raised approximately $3,060,000 from the sale of common and preferred stock. In addition, the Company has received approximately $513,000 from the exercise of options and warrants.
The Company has secured an equity line agreement with an investment group whereupon through the sale of equity, under defined criterion, the Company has access to funds, up to $7,500,000.
Management anticipates raising additional equity funds that will be used to fund any capital shortfalls.
Management is decreasing expenses by using internal resources to perform due diligence and other acquisition related duties on future acquisitions.
Management has streamlined its operations and is developing new products, which are anticipated to have increased gross profit margins.
Management will acquire the assets of Swiss Research, Inc. in the second quarter of 2005. Swiss Research markets and sells branded nutraceutical products addressing major wellness categories, including weight management, arthritis support, cholesterol reduction and diabetes management. This acquisition will enable the Company to take advantage of Swiss’s existing product and distribution channels to improve the Company’s results from operations.
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