Going Concern and Management's Plans
|3 Months Ended|
Mar. 31, 2019
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Going Concern and Management's Plans||
2. Going Concern and Management’s Plans
At March 31, 2019 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 three months of 2019.
The Company had an accumulated deficit of approximately $85,986,000 at March 31, 2019. During the three months ended March 31, 2019, the Company generated a net loss from continuing operations of approximately $1,145,000, used cash in continuing operations of approximately $1,079,000, and the Company expects that it will continue to generate operating losses for the foreseeable future. At March 31, 2019, the Company had a cash balance of approximately $794,000. Total revenues were approximately $1,346,000 and $2,313,000 for the three months ended March 31, 2019 and 2018, respectively. The Company had working capital deficiency of approximately $4,301,000 and $3,384,000 at March 31, 2019 and December 31, 2018, 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 2018 and first quarter of 2019 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 November 16, 2018, the Company entered into a revolving credit facility agreement with GNet Tech Holdings, a related party through one of the Company’s shareholders, Cosmic Forward Limited (“CFL”), that matures on May 31, 2020, under which we can draw up to GBP £1,500,000 (approximately $2,000,000). Interest is payable on any outstanding principal balance at a rate equal to the LIBOR rate plus 4%. Amounts drawn under this facility are payable at the end of one, three, or six months periods at the election of the Company. At March 31, 2019, the Company drew $293,000 under this facility. At May 15, 2019, approximately $1,707,000 was available for us to draw.
From January 9, 2019 to April 2, 2019, the Company sold an aggregate of 232,515 shares of its common stock at a purchase price ranging from $1.146 to $3.85 per share, representing 120% of the closing price the trading day immediately prior to the date of subscription. As of the date of this annual report, the Company has received an aggregate gross proceeds of $479,931 under this private placement. All of the purchasers are citizens of the People’s Republic of China.
Management believes that its available funds and cash flow from operations may not be sufficient to meet our working capital requirements for the twelve months subsequent to the issuance of our financial statements. In order to fund its operations, the Company will need to either raise capital by issuance of stock, or utilize a revolving credit facility with GNet; However, there can be no assurances that our business plans and actions will be successful, that we 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. In addition, due to China’s foreign currency control, the Company cannot move money between China and the USA 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 strictly. We need to get approval from Chinese government to move money from China to the U.S. which might take extra time. As of March 31, 2019 we had a $761,000 cash balance in China.
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