Going Concern and Financial Condition
|6 Months Ended|
Jun. 30, 2022
|Going Concern and Financial Condition|
|Going Concern and Financial Condition||
Note 3 – Going Concern and Financial Condition
Under ASC 205-40, Presentation of Financial Statements—Going Concern, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40.
The accompanying condensed consolidated financial statements as of June 30, 2022 have been prepared assuming the Company will continue as a going concern. As reflected in the condensed consolidated financial statements, the Company had approximately $509,000 in cash at June 30, 2022, and cash used in operating activities of $1.1 million for the six months ended June 30, 2022. Further, the Company had a working capital deficit of $12.1 million, an accumulated deficit of $68.6 million at June 30, 2022, and had a net loss in the amount of approximately $1.5 million for the six months ended June 30, 2022. In addition, all existing secured and unsecured debt held by its principal lender, excluding the profit share liability, in the principal amount of $13.4 million matures on August 25, 2022, which is less than one month from the issuance of these condensed consolidated financial statements.
These factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these condensed consolidated financial statements. The Company has taken steps to alleviate the doubt raised by the application of ASC 205-40. During 2021, the Company eliminated $4,440,000 of convertible notes through conversions to shares of common stock and repaid $10,000 of convertible notes, leaving no convertible notes outstanding as of June 30, 2022. In addition, in June 2021, the Company announced that it had entered into a Debt Repayment and Exchange Agreement with its principal lender which, subject to various closing conditions, including but not limited to the completion of an offering of equity securities resulting in net proceeds of at least $12.0 million by June 30, 2022, was expected to repay all existing secured and unsecured debt obligations held by such lender. Such closing conditions were not met by June 30, 2022. However, the Company is in the process of negotiating certain changes and modifications to the financing arrangements with such lender in view of the pending maturity date of the two notes. Although the Company anticipates that it will be able to finalize such arrangements prior to the current maturity date and that significant revenues will continue in its business operations, no assurances can be given that the Company will be able to finalize such changes and modifications or that the Company can obtain sufficient working capital through its business operations in order to sustain ongoing operations.
The accompanying condensed consolidated financial statements do not include adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
No definition available.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef