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Going Concern Uncertainty
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern Uncertainty
5. Going Concern Uncertainty

 

In connection with preparing its financial statements as of and for the year ended December 31, 2020, the Company’s management evaluated whether there are conditions or events, considered in the aggregate, that are known and reasonably knowable that would raise substantial doubt about the Company’s ability to continue as a going concern through twelve months after the date that such financial statements are issued. During the year ended December 31, 2020, the Company incurred a net loss of $4,415,000. As of December 31, 2020, the Company had $777,000 of cash, total debt outstanding of $2,032,000, and negative working capital of $636,000. The total debt outstanding consists of $532,000 of principal outstanding under the loan the Company received in April 2020 under the Paycheck Protection Program and $1,500,000 of principal outstanding under the loans the Company received in connection with entering into the APA, as amended, which, if the closing of the Asset Sale occurs, will be applied toward the $2.0 million purchase price eGames.com will owe the Company at the closing of the Asset Sale. See Note 2 for more information on the Asset Sale. In November 2020, the Company was informed that approximately $1,093,000 of the $1,625,100 loan under the Paycheck Protection Program would be forgiven, leaving a principal balance of approximately $532,000. All amounts owing under the loan and security agreement with Avidbank were paid on December 31, 2020, when the term loan matured, and Avidbank released its security interest in all of the Company’s existing personal property.

 

As a result of the impact of the COVID-19 pandemic on the Company’s business and taking into account its current financial condition and its existing sources of projected revenue and cash flows from operations, the Company believes it will have sufficient cash resources to pay forecasted cash outlays only through mid-March 2021, assuming the Company is able to continue to successfully manage its working capital deficit by managing the timing of payments to its vendors and other third parties.

 

Based on the factors described above, management concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern through the twelve-month period subsequent to the issuance date of these financial statements. The Company needs to complete the Merger or the Asset Sale or raise capital to meet its debt service obligations and fund its working capital needs. The Company currently has no arrangements for such capital and no assurances can be given that it will be able to raise such capital when needed, on acceptable terms, or at all.

 

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.