Liquidity

9 Months Ended

Sep. 30, 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 $7.5 million for the nine months ended September 30, 2020 and has an accumulated deficit of $51.7 million as of September 30, 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 nine months ended September 30, 2020, the Company raised approximately $3.2 million in additional capital through debt financing (net of repayments).

At September 30, 2020, the Company had $1 million of cash on hand with a negative working capital of $16.6 million. The Company’s ability to meet its ongoing operating cash needs over the next 12 months depends on reducing its operating costs, utilizing our inventory, raising additional debt or equity capital, selling assets and generating positive operating cash flow, primarily through increased sales, improved profit growth and controlling expenses. The Company intend to implement actions to improve profitability by managing expenses while continuing to increase sales. See Notes 10 and 11 to the financial statements for a description of our debt and the debt refinancing initiatives completed in the first half of 2020. If the Company is unable to obtain additional financing, or additional financing is not available on acceptable terms, it may seek to sell assets, reduce operating expenses or reduce or eliminate marketing initiatives, and take other measures that could impair its ability to be successful.

Although the Company’s audited financial statements for the year ended December 31, 2019 were prepared under the assumption that the Company would continue its 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 the Company’s ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, the Company has incurred operating losses since our inception, and even though the Company has reduced its operating expenses and increased its available capacity under its lines of credit, and has large inventory balances from which to draw, the Company expects 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 the Company’s financial condition. If the Company cannot continue as a going concern, its stockholders would likely lose most or all of their investment in us.