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LIQUIDITY

3 Months Ended

Mar. 31, 2024

2.	LIQUIDITY

The Company had net losses of $3.0 million (which includes $1.1 million of non-cash expenses) and $3.8 million (which includes $0.9 million of non-cash expenses) and net cash used in operating activities of $3.0 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the Company had a cash balance of $5.0 million and working capital of $17.8 million. Based on the Company’s current operating plan and the available working capital that can be converted to cash, particularly the accounts receivable balance of approximately $20.1 million the Company believes that it has the ability to fund its operations and meet contractual obligations for at least twelve months from the date of this report.

In 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC (“B. Riley”) under which the Company has the right, but not the obligation, to sell up to $30.0 million worth of shares, but in any event, no more than 2.0 million shares of its common stock over a period of 24 months in its sole discretion (see note 11 for further information). The Company has issued 199,469 shares for $2.5 million since 2022 under this agreement. There is $27.5 million worth of shares of common stock remaining under this facility available to sell through Q4 2024.

The Company’s outstanding warrants generated $0.3 million and $0.1 million of proceeds during each of the three months ended March 31, 2024 and 2023, respectively. Warrants to purchase 370,718 shares of common stock which were issued in our 2019 public offering expired on April 18, 2024. Excluding the warrants issued in our 2019 public offering which recently expired, the Company has a warrant outstanding to purchase up to 200,000 shares of our common stock at an exercise price equal to $17.00 per share that expires in March 2028 that could potentially generate an additional $3.4 million of proceeds, conditioned upon the market price of our common stock and the warrant holder’s ability and decision to exercise them.

In March 2023, the Company entered into a supply chain line of credit agreement with OCI Group for up to $100 million to further support our working capital requirements. Subject to the terms of the agreement, OCI Group will make available to the Company funding based on amounts owed to the Company by its customers.

The Company believes that it will become profitable in the next few years as our revenues continue to grow, we improve our gross margins and we leverage our overhead costs, but we expect to continue to incur losses for a period of time. If necessary, the Company may raise additional capital to finance its future operations through equity or debt financings. There is no guarantee that profitable operations will be achieved, or that additional capital or debt financing will be available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to meet our obligations or enable us to continue to implement our long-term business strategy. In addition, obtaining additional funding or entering into other strategic transactions could result in significant dilution to our stockholders.