Note 2 - Liquidity and Going Concern |
3 Months Ended |
|---|---|
Sep. 30, 2017 | |
| Notes to Financial Statements | |
| Liquiditiy and Going Concern [Text Block] |
NOTE
2 –
LIQUIDITY AND
GOING CONCERN
The accompanying condensed 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 Company has incurred an accumulated deficit of
$21,143,000 through September 30, 2017, and a net loss of $1,446,000 for the three months ended September 30, 2017. To date, our revenues and operating cash flows have not been sufficient to sustain our operations and we have relied on debt and equity financing to fund our operations. These factors raise substantial doubt about our ability to continue as a going concernfor the twelve months following the filing date of our Quarterly Report on Form 10 -Q, November 14, 2017. Our ability to continue as a going concern is dependent upon our ability to raise additional capital on a timely basis until such time as revenues and related cash flows are sufficient to fund our operations.Management has undertaken steps to improve operations with the goal of sustaining our operations. These steps include (a) developing additional products to serve the Class
1 and Class 2 industrial equipment markets; and (b) expand our sales force throughout the United States. In that regard, we have increased our research and development efforts to focus on completing the development of energy storage solutions that can be used on larger forklifts and have also doubled our sales force since December 2016 with personnel having significant experience in the industrial equipment handling industry. The impact of these steps is expected to be seen beginning in the second quarter of fiscal year 2017.
We have evaluated our expected cash requirements over the next twelve months, which include, but are not limited to, investments in additional sales and marketing and product development resources, capital expenditures, and working capital requirements and have determined that our existing cash resources are not sufficient to meet our anticipated needs during the next twelve months, and that additional financing is required to support current operations. Based on our current and planned levels of expenditure, we estimate that total financing proceeds of approximately $5,000,000 will be required to fund current and planned operations for the twelve months following the filing date of this Quarterly Report on Form 10 -Q, November 14, 2017. In addition, we anticipate that further additional financing may be required to fund our business plan subsequent to that date, until such time as revenues and related cash flows become sufficient to support our operating costs.We intend to continue to seek capital through the sale of equity securities through private placements, in addition to utilizing our existing credit facility with Esenjay Investments, LLC (“Esenjay”). Esenjay is deemed to be a related party as Mr. Michael Johnson, the beneficial owner and director of Esenjay, is a current member of our board of directors and a major shareholder of the Company. The credit facility bears interest at 8 % per annum, matures on January 31, 2019, and is convertible into shares of common stock at $0.60 per share (the “Unrestricted Line of Credit”). Between
July 1, 2014 and September 30, 2017, we have borrowed an aggregate of $10,430,000, of which $3,750,000 has been converted to equity, pursuant to various credit facilities with Esenjay of which the Unrestricted Line of Credit remains outstanding. As of September 30, 2017, the amount outstanding under the Unrestricted Line of Credit was $6,680,000, with $3,320,000 available for future draws at Esenjay’s discretion. As of November 14, 2017, the amount outstanding under the Unrestricted Line of Credit was $7,415,000, with an aggregate of $2,585,000 available for future draws. Esenjay owns approximately 64% of our issued and outstanding common stock as of November 14, 2017.
Although management believes that the additional required funding will be obtained, there is
no guarantee we will be able to obtain the additional required funds on a timely basis or that funds will be available on terms acceptable to us. If such funds are not available when required, management will be required to curtail its investments in additional sales and marketing and product development resources, and capital expenditures, which may have a material adverse effect on our future cash flows and results of operations, and our ability to continue operating as a going concern. The accompanying financial statements do not include any adjustments that would be necessary should we be unable to continue as a going concern and, therefore, be required to liquidate our assets and discharge our liabilities in other than the normal course of business and at amounts that
may differ from those reflected in the accompanying condensed consolidated financial statements. |