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4. LIQUIDITY | 12 Months Ended
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Dec. 31, 2020
Liquidity |
LIQUIDITY | The Company’s cash and cash equivalent balance on December 31, 2020 was $771.7 thousand compared to $1.2 million on December 31, 2019. On December 31, 2020, the Company had $2.4 million bank debt outstanding on an available asset-based credit line of $4.0 million, and working capital of $5.9 million. The addition of US tariffs and the Coronavirus (“COVID-19”) pandemic has created potential disruptions to the Company’s operations. The 25% US tariffs assessed on products imported from China had a significant impact on cash and net loss for 2019 and for first two quarters of 2020. For the years ended December 31, 2020 and 2019, tariffs were $2.8 million and $3.2 million, respectively. These tariffs had an unfavorable impact on the Company’s financial performance until July 2020, the first full month after which the Company fully transitioned all of its core production supply out of China. In late 2019, the Company made the decision to move its outsourced manufacturing operations from China to Vietnam, primarily to end the exposure to the trade-war imposed tariffs with China. While the COVID-19 pandemic caused delays in the original transition plan, the Company worked actively with its primary outsourced development partner to establish manufacturing operations in Haiphong, Vietnam. The transition to Vietnam was completed in June 2020. All manufacturing of existing models as of July 2020 takes place in Vietnam. For the second half of the year, only the initial manufacturing runs of new models took place in China. This transition lessened the Company’s tariff burdens and allows for the eventual release of an additional $800,000 in restricted cash over the next year related to performance bonds required to be posted related to the tariffs. The Company is also further diversifying its relationships with outsourced manufacturers. The Company signed a three-year agreement with Foxconn, one of the leading global outsourced manufacturers to the high-tech industry, to manufacture several of the new models the company plans to introduce to the market during 2021. The Company implemented cost cutting measures to conserve cash including postponing new hires in 2020 and not renewing the same footprint of its headquarters office lease when it expired in June 2020. The Company downsized its executive offices by retaining a small office within the City of Boston for research and testing purposes on a short-term, month-to-month basis at a cost of $682 per month starting November 1, 2020. Our work force continues to work remotely, and we are continuing operations. We have negotiated improved payment terms with our primary outsourced manufacturing partner. The Company expanded its revolving working capital line of credit with Rosenthal & Rosenthal from $4 million to $5 million in February 2021 and subsequently replaced the Rosenthal credit line with a $12 million credit facility and a $1 million credit card line provided by Silicon Valley Bank in March 2021. The Company continues to develop new products and anticipates that it will introduce several new models to the market during 2021. While the COVID-19 outbreak disrupted sales and production for a short period of time during mid-March 2020, the Company worked through the disruption. In mid-March, sales initially decreased in response to a key distributor focusing its distribution logistics on essential healthcare products. The Company’s products, which are instrumental to businesses and consumers establishing remote and home-based offices, have since been designated as essential and are once again being offered and are selling at normal levels and certain models are currently selling above their average run rates before COVID-19 had a global impact on business and the economy. The Company continues to work closely with its manufacturing partners and distributors to ensure that the Company’s products remain consistently available for sale to end-users. The Company applied for and received approval for a Small Business Administration (“SBA”) Paycheck Protection Plan Loan with Primary Bank under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The loan from the US government in the amount of $583.3 thousand was approved and funded in April 2020. The Company used the proceeds from the loan for qualifying expenses as defined in the CARES Act. The loan and related accrued interest was partially forgiven in 2020.

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- Definition 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 40 -URI http://asc.fasb.org/subtopic&trid=51888271 + Details
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