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Liquidity and Management's Plans

6 Months Ended

Jun. 30, 2020

3.	Liquidity and Management’s Plans

Through June 30, 2020, the Company had incurred an accumulated deficit since its inception of $21,724,633. At June 30, 2020, the Company had a cash balance of $1,876,816. Since inception, the Company’s operations have primarily been funded through a combination of gross profits, government-sponsored loans, and the sale of both equity and debt securities.

As part of its overall strategic plan to increase the Company’s revenues, improve liquidity, and move the Company towards profitability, the Company acquired Graphic Sciences on March 2, 2020, and CEO Imaging Systems, Inc. (“CEO Image”) on April 21, 2020. Additionally, proceeds from issuance of shares, including conversion of convertible debt, and issuance new debt on March 2, 2020 enabled the company to restructure its balance sheet and reduce its overall debt burden by approximately $3 million.

The Company’s business plan is to increase our sales and market share by focusing on a targeted marketing approach to select vertical markets, maximizing cross selling opportunities within the newly expanded customer base of the consolidated company, enhancing our direct selling results, and continuing to develop a network of select resellers through which we expect to sell our expanded document management solutions. We expect that these initiatives will require us to continue our efforts towards direct marketing campaigns and leads management, reseller on-boarding, and to develop additional software integration and customization capabilities, all of which may require additional capital. We also plan to continually monitor opportunities to make strategic acquisitions that will strengthen or complement our product and services offerings, bring more solutions to our customers, and increase revenues and liquidity.

In light of COVID-19, we received a loan through the Paycheck Protection Program (“PPP”) in April 2020 in the amount of $838,700. Currently, we believe that we are complying with the program requirements and that the entire amount will be forgiven, but will not have assurance on the amount forgiven until our forgiveness application is accepted by the Small Business Administration. In addition, we have taken steps to reduce operating expenses, including a temporary furlough at Graphic Sciences until the Michigan stay-at-home order was lifted and a reduction in management compensation through June 2020.

However, despite these successful efforts to increase liquidity, it is based on our current plans and assumptions, and significant economic uncertainties remain due to COVID-19. Therefore, there continues to be substantial doubt our capital resources, including our cash and cash equivalents, along with funds expected to be generated from our operations, will be sufficient to meet our anticipated cash needs for the next 12 months. Over the next year and aside from general working capital, we will have debt service commitments, installment payment obligations for a previous transaction, and potential earnout payments with respect to previous transactions. Due to our history of operating losses as well as general overall economic conditions and the ongoing COVID-19 pandemic, there is no assurance that the Company will be able to obtain additional capital or debt financing within that time if needed. Given these conditions, the Company’s ability to continue as a going concern is contingent upon sufficiently enhancing its operating cash flow, obtaining forgiveness of our PPP loan, successfully managing the transition of its recent acquisitions of Graphic Sciences and CEO Image, and successfully managing its cash requirements. Any projections of future cash needs and cash flows are subject to substantial risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” above in this report and the risk factors included in Part II, Item IA of this Report, Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed on May 15, 2020, and the risk factors that are included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 30, 2020.

The Company’s condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should it be unable to continue as a going concern.