Quarterly report pursuant to Section 13 or 15(d)

Liquidity and Going Concern

Liquidity and Going Concern
3 Months Ended
Mar. 31, 2024
Liquidity And Going Concern [Abstract]  
Liquidity and Going Concern

Note 2 - Liquidity and Going Concern


The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.


The Company has historically funded its operations with cash flow from operations, equity capital raises, and note payable agreements from shareholders and private investors, in addition to institutional loans. The Company's principal uses of cash have been debt service, capital expenditures, working capital, and funding operations. The Company incurred net losses of approximately $3.9 million during the three months ended March 31, 2024. Cash used in operating activities was approximately $0.8 million for the three months ended March 31, 2024. As of March 31, 2024, the Company has a working capital deficit of $9.4 million which compares to $7.4 million as of March 31, 2023.


Late in the third quarter of 2022, the Company secured a term loan in the amount of $4.0 million. Additionally, the Company secured an asset based line of credit with a $8.0 million credit limit subject to accounts receivable and inventory balances. The term loan and asset based line of credit were secured in order to augment the Company's liquidity, as needed, through the execution of management's plan. The Company has drawn $4.0 million of the term loan and $3.9 million (net of repayments) of the asset based line of credit as of March 31, 2024. The amount remaining available under the asset based line of credit is $2.0 million. No amount remained available under the term loan. See Note 5 for a description of the asset based line of credit and Note 6 for a description of the term loan.


On April 3, 2024, we issued an aggregate of $1.6 million in principal amount of unsecured promissory notes (the “April 2024 Convertible Notes”) to select accredited investors to fund operations. The aggregate principal amount of the April 2024 Convertible Notes is inclusive of $1.1 million from related parties. See Note 13 for further discussion.


We are currently evaluating several different strategies to enhance our liquidity position. These strategies may include, but are not limited to, pursuing additional actions under our business transformation plan, and seeking additional financing from both the public and private markets through the issuance of equity or debt securities. The outcome of these matters cannot be predicted with any certainty at this time. We need additional funding to execute our business plan and continue operations. If capital is not available to us when, and in the amounts needed, we could be required to liquidate our inventory and assets, cease or curtail operations, which could materially harm our business, financial condition and results of operations, or seek protection under applicable bankruptcy laws or similar state proceedings. There can be no assurance that we will be able to raise the capital we need to continue our operations.


We have prepared cash flow forecasts which indicate that based on our expected operating losses and cash consumption in order to fund inventory growth, we believe that absent an infusion of sufficient capital there is substantial doubt about our ability to continue as a going concern for twelve months after the date the condensed consolidated financial statements for the quarter ended March 31, 2024 are issued. The Company's plan includes the items noted above as well as securing external financing which may include raising debt or equity capital. These plans are not entirely within the Company's control including our ability to raise sufficient capital on favorable terms, if at all.