Going Concern / Liquidity

12 Months Ended

Dec. 31, 2020

Customer net volume rebate payable

Going Concern / Liquidity

(3) Going Concern / Liquidity

We believe that cash from operations and cash on hand, in addition to unused borrowing capacity, may not be adequate to fund our operating plans through 2021. We are working to reduce these risks and the results of the Company in this regard have improved markedly, but some of this is dependent on several things over which we have limited control. Our largest customer made up 30% of our 2020 revenue, or $5.2M, while making up 63%, or $7.9M, of our 2019 revenue.  We expect the more recent volume levels to be representative of 2021 demand.    This has limited our flexibility and required us to make cash management a top priority. Fortunately, we have seen a significant increase in sales of our Solésence products in 2020, which we expect to continue in 2021.  We have also seen a significant increase in revenue from our medical diagnostics customer between 2019 and 2020, relating to current conditions relative to enhanced degrees of testing for COVID-19 and other forms of viruses.  We are unsure as to the extent to which this medical diagnostics material will develop or diminish over time.  We had annual net income in 2020 for the first time in the Company’s history, and expect to have net income again for 2021.  Generally, our growth has required significant additional investment in working capital. Given these issues, and other commercial realities, we are monitoring the additional working capital demands that this could create as we continue to execute on our Solésence growth strategy. The timing of cash flows is critical. If cash generated from operations is not materially consistent with our plans, we believe that we may need to seek additional funding to address working capital demands. This uncertainty has caused us to be unable to assert that, for the next twelve months, we have enough current cash and guaranteed access to financing to fund operations, and to continue with our current growth strategy in terms of investment in capital equipment and in operating expenses related to Solésence, without securing additional financing.

These circumstances raise substantial doubt as to the Company’s ability to operate as a going concern under U.S. GAAP. The accompanying financial statements have been prepared on a going concern basis in accordance with U.S. GAAP. As such, no adjustments have been made to the consolidated financial statements for the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue operating as a going concern.

We believe that we will be able to secure additional financing if needed, but we do not have any additional financing commitments in place as of today. However, we may not be able to secure additional financing in a timely manner under commercially reasonable terms, or at all. If we are unable to secure additional financing, the operations of the Company might need to be curtailed to a certain degree, and we would need to delay capital expenditures related to our Solésence growth strategy, which could impede growth, and impact cost savings anticipated in 2021 and 2022.