Annual report pursuant to Section 13 and 15(d)

Going Concern Issues

v3.19.1
Going Concern Issues
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Substantial Doubt about Going Concern
Note 3 — Going Concern Issues
 
 
The accompanying Consolidated Financial Statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. These Consolidated Financial Statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern. The Company incurred annual net losses for the years ended December 31, 2018, 2017 and 2016 of $21,875,713, $19,633,502 and $19,250,082, respectively. As of December 31, 2018, the Company has an accumulated deficit of $118,266,441.
 
The Company’s cash requirements are primarily for funding operating losses, working capital, research and development, and capital expenditures. Our cash requirements related to funding operating losses depend on numerous factors, including new product development activities, our ability to commercialize our products, our products’ timely market acceptance, selling prices and gross margins, and other factors. Historically, the Company has met its cash needs by the sale of equity, borrowings under notes, and sales of convertible debt.
 
The Company’s management intends to take actions necessary to continue as a going concern, as discussed herein. The Company will need to grow its business significantly to become profitable and self-sustaining on a cash flow basis or it will be required to raise new equity and/or debt capital. Management’s plans concerning these matters and managing our liquidity includes among other things:
 
 
o
the continued sale of our existing M300 and Blade inventory;
 
o
the continued sale of our upgraded M300XL Smart Glasses with new cameras and external batteries;
 
o
the introduction of our M400 Smart Glasses, our third-generation monocular device for enterprise. New M400 Smart Glasses will run on an XR1 Qualcomm CPU and include the adoption of OLED micro-display technology. We expect to launch the product in the third quarter of 2019;
 
o
the commencement of volume manufacturing and sale of the new M100 Smart Swim product in the third quarter of 2019;
 
o
new engineering services and product sales into business customers and governmental entity customers that primarily provide security and defense services, including police, fire fighters, EMTs, other first responders, and homeland and border security that are now allowed under our recent non-compete amendment with the purchaser of our former defense division;
 
o
tightly control operating costs and reduce spending growth rates wherever possible;
 
o
decrease tradeshow and PR firm spending;
 
o
right size operations across all areas of the Company, both with head-counts and spending;
 
o
delay or curtail discretionary and non-essential capital expenditures not related to near-term new products; and
 
o
reduce the rate of research and development spending on new technologies, particularly the use of costly external contractors.
 
However, if these plans are not successful within a reasonable time period, we will have to raise additional capital to maintain operations and/or materially reduce our operating and new product development costs.
 
If the Company raises additional funds, the ownership interest of existing stockholders may be diluted. The amount of such dilution could increase due to the issuance of new securities with warrants or other dilutive characteristics, such as full ratchet anti-dilution clauses or price resets.
 
Based upon our current amount of cash on hand, management’s historical ability to raise capital, and our ability to manage our cost structure and adjust operating plans if and as required, we have concluded that substantial doubt of our ability to continue as a going concern has been alleviated.