Liquidity

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity

2. Liquidity

Historically, the Company has funded its cash and liquidity needs through operating cash flow convertible notes, extended credit terms, and equity financings. The Company has incurred a net loss of $3.5 million and has an accumulated deficit of $47.7 million as of March 31, 2020. The Company has been dependent on raising capital from debt and equity financings as well as the utilization of our inventory to meet its needs for cash flow used in operating activities. For the three months ended March 31, 2020, we raised approximately $2.3 million in additional capital through debt financing (net of repayments).

At March 31, 2020, the Company had $1.3 million of cash on hand with a positive working capital of $2.8 million. Our ability to meet our ongoing operating cash needs over the next 12 months depends on reducing our operating costs, utilizing our inventory, raising additional debt or equity capital and generating positive operating cash flow, primarily through increased sales, improved profit growth and controlling expenses. We intend to implement actions to improve profitability, by managing expenses while continuing to increase sales. Additionally, we are seeking to leverage our $11.1 million inventory balance and our $1.1 million accounts receivable balance to help satisfy our working capital needs over the next 12 months. See Notes 10 and 11 to our financial statements for a description of our debt and the debt refinancing initiatives completed in the first quarter of 2020. If we are unable to obtain additional financing, or additional financing is not available on acceptable terms, we may seek to sell assets, reduce operating expenses or reduce or eliminate marketing initiatives, and take other measures that could impair our ability to be successful.

Although our audited financial statements for the year ended December 31, 2019 were prepared under the assumption that we would continue our operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the year ended December 31, 2019 contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, we have incurred operating losses since our inception, and even though we have reduced our operating expenses and increased our available capacity under our lines of credit, and have large inventory balances to drawn from, we expect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.