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Liquidity and Going Concern | 12 Months Ended
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Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Liquidity and Going Concern | Note 3 – Liquidity and Going Concern The Company’s financial statements are prepared using account principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has a cumulative net loss from inception to December 31, 2022 of approximately $24 million. The accompanying financial statements for the year ended December 31, 2022 have been prepared assuming the Company will continue as a going concern. The Company’s cash resources may be insufficient to meet its anticipated needs during the next twelve months. The Company may require additional funding on acceptable terms to support it is planned future operations. Management’s plans include executing on its business plan and raising external funds to the extent needed. These factors are indicators that there is substantial doubt about the ability to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under a Credit Agreement. Until September 30, 2021, that Credit Agreement was with PNC (see Note 9), which began in December 2017 as an $18 million revolving credit facility and a $6 million term loan. As noted in Note 9, we encountered a series of challenges in meeting conditions of that agreement, which added to liquidity issues and raised an issue regarding our ability to continue as a going concern during that period. During September 2021, we entered into a new credit agreement with Line Financial, using those proceeds and the proceeds from multiple preferred stock issuances and the sale of preferred stock and the sale / leaseback transaction of our Lake Barrington, IL property (below) to fully repay PNC. The new agreement with Line Financial includes a revolving credit facility for up to $6 million and a term loan of $0.7 million, all supported by the majority of our assets. We also made structural changes to our business, removing the cash required to support subsidiaries that are no longer part of our group and other operating improvements. In January 2021 we entered into an agreement with a related party, LF International Pte. Ltd. which is controlled by Company director, Chairman, President and Chief Executive Officer, Mr. Yubao Li, to purchase shares of Series C Preferred stock. We issued 170,000 shares of Series C Preferred for an aggregate purchase price of $1,500,000. The Series C Preferred have an initial stated value of $10.00 per share and liquidation preference over common stock. On April 23, 2021, the Company entered into a Purchase and Sale Agreement (“PSA”) with an unaffiliated purchaser (the “Purchaser”) pursuant to which the Company sold its facility in Lake Barrington, Illinois (the “Lake Barrington Facility”), in which our headquarters office, production and warehouse space are located, to the Purchaser. The sale price for the Lake Barrington Facility was $3,500,000, consisting of $2,000,000 in cash and a promissory note with a principal amount of $1,500,000, due and payable on May 3, 2021 (the “Purchaser Promissory Note”). As part of its agreements with PNC, the Company agreed that the full $2,000,000 in cash proceeds from the sale of the Lake Barrington Facility would be applied to repay the $2,000,000 term loan owed to PNC pursuant to the Loan Agreement. The Company further agreed that $1,500,000 in proceeds from the Purchaser Promissory Note was applied to amounts due and owing to PNC under revolving credit advances made pursuant to the Loan Agreement (the “Revolving Loans”). Concurrently with the closing under the PSA, the Company and the Purchaser entered into a lease agreement pursuant to which the Company agreed to lease the Lake Barrington Facility from the Purchaser for a period of ten years. The annual base rent commences at $500,000 for the first year of the term and escalates annually to $652,386 during the last year of the term of the lease. In June 2021, the Company received $1.5 million from a third party as an advance on a proposed sale of Series D Redeemable Convertible Preferred Stock. As of December 1, 2021, the terms of the arrangement were finalized and this investment was reclassified into equity. We believe we have been in compliance with our new credit facility since that time. As of December 31, 2022 we have drawn approximately $2.9 million of the maximum $6.0 million revolving line of credit, which is available subject to the value of receivables and inventory that support the line. Through December 31, 2022, the Company has received approximately $160,000 in Employee Retention Tax Credits (“ERTC”) from the United States Government related to claims that were filed during 2021. $123,000 is listed as General and Administrative, while the remainder is in Other Income. During October 2022 we had outstanding $1.2 million of additional ERTC claims that had not been processed. We factored those claims with a third party for $0.9 million. To the extent any portion of those claims are ultimately denied, we must refund a pro-rated amount of that $0.9 million. This is treated as deferred income on the balance sheet until such time as the original claims are processed. During January 2023, approximately $0.8 million of these claims were processed and paid, which was forwarded to the third party. At that time, we recognize approximately $0.6 million of the related deferred income.

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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 https://asc.fasb.org/subtopic&trid=51888271 + Details
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