Liquidity, Financial Condition and Management's Plans
|9 Months Ended|
Sep. 30, 2018
|Liquidity, Financial Condition and Management's Plans [Abstract]|
|Liquidity, Financial Condition and Management's Plans||
2. Liquidity, Financial Condition and Management’s Plans
At September 30, 2018, the Company’s principal sources of liquidity were its cash and cash equivalents and the net proceeds from the sales of shares of common stock in the first nine months of 2018.
The Company had an accumulated deficit of approximately $81,025,000 at September 30, 2018. During the nine months ended September 30, 2018, the Company generated a net loss from continuing operations of approximately $10,854,000, used cash in continuing operations of approximately $4,229,000, and the Company expects that it will continue to generate operating losses for the foreseeable future. At September 30, 2018, the Company had a cash balance of approximately $1,653,000. Total revenues were approximately $1,895,000 and $3,052,000 for the three months ended September 30, 2018 and 2017, respectively, and approximately $6,327,000 and $10,621,000 for the nine months ended September 30, 2018 and 2017, respectively. The Company had working capital deficiency of approximately $2,069,000 and $1,140,000 at September 30, 2018 and December 31, 2017, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. In order to alleviate the substantial doubt, the Company has approved and undertaken several measures.
The Company is closely monitoring operating costs and capital requirements. Management of the Company also made efforts in 2017 and first three quarters of 2018 to contain and reduce cost, including implementing a new approval process over travel and other expenses, significantly reducing the cash compensation for independent board directors, terminating non-performing employees and eliminating certain positions, and replacing and negotiating with certain vendors. We also sold our Noble Voice business on May 25, 2018 to reduce operating losses and cash burns. If we are still not successful in sufficiently reducing our costs, we may then need to dispose our other assets or discontinue business lines.
On January 29, 2018, the Company sold 380,295 shares of common stock at a price of $3.91 per share for gross proceeds of $1,486,953. The per share purchase price reflected the closing price of the Company’s shares of common stock on January 24, 2018. The purchaser is Mr. Shengqi Cai, an individual and a resident of the People’s Republic of China.
On June 25, 2018, the Company sold 496,510 shares of common stock at a price of $2.89 per share for gross proceeds of $1,434,914. The purchaser is China EWI International Finance Group Co., Limited, a limited liability company based in the People’s Republic of China.
On November 5, 2018, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with GNet Tech Holdings Public Limited Company (the “GNet Tech”), a related party through one of the Company’s shareholders, Cosmic Forward Limited (“CFL”), pursuant to which the Company issued to GNet Tech a $500,000 convertible promissory note with an interest rate of 6% per annum (the “Note”). The Note shall mature six months after the date of issuance (the “Maturity Date”). Pursuant to the Note Purchase Agreement and the Note, at any time on or after the Maturity Date, at the election of the note holder, the Note will convert into the Company’s common stock (the “Common Stock”) at a conversion price of the lower of (i) the closing price of the Common Stock on NASDAQ immediately preceding the date of issuance or the date of conversion, as applicable, or (ii) the average closing price of the Common Stock on NASDAQ for the five trading days immediately preceding the date of issuance or the date of conversion, as applicable (the “Minimum Price”). However, in no event shall the conversion price be less than the Minimum Price on the date of issuance. The issuance of the Note is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction not involving a public offering.
On November 16, 2018, the Company entered into a revolving credit facility agreement (the “Revolving Credit Facility Agreement”) with GNet Tech, pursuant to which GNet Tech has agreed to provide the Company with working capital to support its business. The availability period of the Revolving Credit Facility (“RCF”) is the date of the Revolving Credit Facility Agreement until May 31, 2020. GNet Tech agreed to provide the Company with a RCF with a maximum of GBP £1,500,000 at interest of LIBOR rate plus 4% per annum, payable at the end of one, three or six months (specified by the Company) after the loan is drawn. The Company shall repay the loan on May 31, 2020, or any other date which may be agreed in writing between the parties.
Management believes that its available funds will be sufficient to meet its working capital requirements through November 2019. However, there can be no assurances that the plans and actions proposed by management will be successful, that the Company will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or effectuate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all. Due to China’s foreign currency control, the Company may not be able to move money between China and the U.S. freely. The People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) regulate the flow of foreign exchange in and out of the country. We need to get approval from the Chinese government to move money from China to the U.S. which might take extra time. As of September 30, 2018 we had a $1,332,000 cash balance in China.
The entire disclosure relating to liquidity, financial condition, and management's plans.
No definition available.