Schmitt Industries Inc.("Schmitt," "Company," "Registrant" and "We") is a holding company owning subsidiaries engaged in diverse business activities. Schmitt's operating businesses include propane tank monitoring solutions, precision measurement solutions and ice cream production and distribution. Our subsidiaries include our Measurement Segment ("SMS") and our Ice Cream Segment, which is comprised of Ample Hills. We continually assess strategic opportunities to improve shareholder value. On April 14, 2022, the Company announced its intention to focus on Ample Hillsas its core business. This focus will enable Schmitt to accelerate its Ample Hillsgrowth strategy while saving costs and focusing resources on Ample Hillsas Schmitt's core business line. In conjunction with the focus on Ample Hills, the Company announced a strategic review of its Schmitt Measurement Systems business lines based in Portland, Oregon. On July 9, 2020, Ample Hills Acquisition LLC("Buyer") entered into an Asset Purchase Agreement (the "Agreement"), dated as of June 29, 2020, with Ample Hills. The Transactions closed on July 9, 2020, the day after a sale order approving the Transactions was entered by the Bankruptcy Court. The Ample Hillsentities were debtors-in-possession under title 11 of the United States Code, 11 U.S.C. § 101 etseq. pursuant to voluntary petitions for relief filed under Chapter 11 of the Bankruptcy Code on March 15, 2020in the Bankruptcy Courts. The Transactions were conducted through a Bankruptcy Court-supervised process, subject to Bankruptcy Court-approved bidding procedures, approval of the Transactions by the Bankruptcy Court, and the satisfaction of certain closing conditions. RECENT DEVELOPMENTS Strategic Highlights
As disclosed above, on
focus on Ample Hills and the Ice Cream Segment as its core business.
May 2, 2022, the Company filed a shelf registration statement for the sale of up to $100,000,000in debt and equity securities. On May 20, 2022, the Company entered into a sales agreement with Roth Capital Partners, LLCand filed a prospectus supplement for an at-the-market offering of up to $5,000,000in common stock. Subsequent to Fiscal Year 2022, the Company announced additional strategic updates, including the sale and leaseback of the Nicolai buildings in Portlandfor $3.5 milliongross sales proceeds. The real estate transaction closed on July 18, 2022. 19 Table of Contents
July 20, 2022, the Company announced that it entered into a non-binding term sheet which contemplates a potential reverse merger with Proton Green, LLCand the spin-off of Schmitt's Ample Hills business to pre-merger shareholders of Schmitt's common stock. It is proposed that Proton Green would become a wholly owned subsidiary of Schmitt, the Company would be renamed " Proton Green Corporation," and the common stock would continue to trade on the Nasdaq under a new symbol. If consummated, Ample Hills would become a standalone entity and the newly merged company would retain any remaining components of the SMS businesses.
previously announced non-binding term sheet with Proton Green regarding the
reverse merger and spin-off of Schmitt’s Ample Hills business. As a result of
the termination, the transactions contemplated by the term sheet will not
SIGNIFICANT ACCOUNTING POLICIES
The analysis of the Company's financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with Generally Accepted Accounting Principles in the
U.S.("GAAP"). In preparing the Consolidated Financial Statements certain estimates and judgments are required that affect the reported amounts within the Consolidated Statement of Operations and Balance Sheet. Note-3 - Summary of Significant Accounting Policies, in the accompanying Notes to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.
Management asserts the estimates, assumptions and judgments involved in the
accounting policies described in Note-3 – Summary of Significant Accounting
Policies have the greatest potential impact on our Consolidated Financial
Statements and have deemed these to be our critical accounting policies and
Revenue Recognition The Company generates revenues from the following sources: (i) retail restaurant sales, (ii) factory sales, (iii) measurement product sales, and (iv) remote
tank monitoring services. Retail Restaurant Sales, net The Company's Ice Cream Segment generates revenues from retail restaurant sales to its end-user customers at the time of sale, net of discounts, coupons, employee meals, and complimentary meals and gift cards. Sales tax is collected from customers and remitted to governmental authorities and is presented on a net basis within revenue in our Consolidated Statement of Operations. Factory Sales, net The Company's Ice Cream Segment generates revenues from sales of finished goods from its
Brooklyn, New Yorkfactory, including wholesale, e-commerce, and direct-to-consumer sales. These revenues, net of sales tax paid to states, are recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. The Company also generates revenue by providing manufacturing production services to third parties and recognizes revenues as services are provided to the customer. Measurement Product Sales The Company's Measurement Segment determines the amount of revenue it recognizes associated with the transfer of each product. For sales of products to all customers, each transaction is evaluated to determine whether there is approval and commitment from both the Company and the customer for the transaction; whether the rights of each party are specifically identified; whether the transaction has commercial substance; whether collectability from the customer is probable at the inception of the contract and whether the transaction amount is defined. If a transaction to sell products meets all of the above criteria, revenue is recognized for the sales of product at the time of shipment. The Company incurs commission expense associated with the sales of certain measurement products. The Company applies the practical expedient allowed under Accounting Standards Codification ("ASC") 340-40-25-4 by recognizing the expense at the time the product is shipped. These amounts are recorded within general, administrative and sales expense. The Company also incurs costs related to shipping and handling of its products, the costs of which are expensed as incurred as a component of cost of sales. 20 Table of Contents
Remote Tank Monitoring Services
The Company's Measurement Segment revenues associated with the Xact product line include satellite focused remote tank monitoring products and related monitoring services for markets in the Internet of Things environment ("IoT"). The Company determines the amount of revenue it recognizes associated with the transfer of such services. For delivery of monitoring services to all customers, each transaction is evaluated to determine whether there is approval and commitment from both the Company and the customer for the transaction; whether the rights of each party are specifically identified; whether the transaction has commercial substance; whether collectability from the customer is probable at the inception of the contract and whether the transaction amount is defined. If a transaction to provide monitoring services meets all of the above criteria, revenue is recognized at the completion of the month in which monitoring services are provided.
Customer Deposits and Prepayments
The Company defers revenue recognition of revenues in instances where
consideration is received from customers in advance of the Company completing
its obligations in exchange for such consideration.
In accordance with ASC 805 - Business Combinations ("ASC 805"), the Company allocates the purchase consideration to the identifiable assets acquired and liabilities assumed in business combinations based on their acquisition-date fair values. The excess of the purchase consideration over the amounts assigned to the identifiable assets and liabilities is recognized as goodwill, or if the fair value of the net assets acquired exceeds the purchase consideration, a bargain purchase gain is recorded. Factors giving rise to goodwill generally include operational synergies that are anticipated as a result of the business combination and growth expected to result in economic benefits from access to new customers and markets. The fair values of identifiable intangible assets acquired in business combinations are generally determined using an income approach, requiring financial forecasts and estimates as well as market participant assumptions. The incremental financial results of the Ample Hills acquisition are included in the Company's consolidated financial results from the respective acquisition date. Bargain Purchase Gain In connection with the acquisition of Ample Hills during Fiscal 2021, the Company recorded an initial bargain purchase gain of
$1,271,615that was recorded as a component of other income on the Consolidated Statement of Operations. As a result of additional information obtained during the measurement period about the facts and circumstances that existed as of the acquisition date, the Company recorded measurement period adjustments during the year, which resulted in a reduction in the bargain purchase gain for Fiscal 2021 to $1,138,808. The adjustments related to additional cure payments made during the year, the discovery of obsolete inventory, and the reduction of the deferred tax liability. The bargain purchase gain amount represents the excess of the estimated fair value of the net assets and intangibles, described below, acquired over the estimated fair value of the consideration transferred to the sellers and their landlords. In accordance with ASC 805, we have estimated the fair value of the net assets acquired as of the acquisition date. 21 Table of Contents
Intangible Assets and Impairment
Indefinite-Lived Intangible Assets
Definite-lived and indefinite-lived intangible assets arising from business combinations include patented technology, proprietary recipes, websites and trademarks and trade names. Definite-lived intangible assets are amortized over the estimated period during which the asset is expected to contribute directly or indirectly to future cash flows. Intangible assets that are considered to be indefinite-lived are not amortized. Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold, and use is based on the amount by which the carrying value exceeds the fair value of the asset. Inventories, net Inventories are valued at the lower of cost or net realizable value with cost determined on the average cost basis. Costs included in inventories consist of materials, labor and manufacturing overhead, which are related to the purchase or production of inventories. Write-downs, when required, are made to reduce excess inventories to their net realizable values. Such estimates are based on assumptions regarding future demand and market conditions. If actual conditions become less favorable than the assumptions used, an additional inventory write-down may be required. Lease Accounting - Leases The Company evaluates their leases to determine if they have the right to control the use of an asset, or groups of assets, for a period of time in exchange for consideration. If the determine that they have the right to obtain substantially all of the economic benefits arising from the use of such asset, the recognize a right-of-use asset and lease liability. The Company evaluates each lease to estimate their expected term which includes renewal options that they are reasonably assured that they will exercise and they also evaluate the classification of the lease as either an operating lease or a finance lease. As the Company's leases do not provide an implicit rate, the Company must estimate an incremental borrowing rate based on the information available at the time the lease is commenced or amended. The estimated rate is directly utilized in determining the present value of the lease payments. The Company estimated the incremental borrowing rate based on prevailing financial market conditions, peer company credit analyses and management judgment. The Company asses their right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. 22 Table of Contents Changes in assumptions regarding lease renewals and estimated incremental borrowing rates may produce materially different amounts in the initial recognition of right-of-use assets and lease liabilities. Additionally, an inability to perform on the Company's strategic revenue and cash flow growth plans could result in the recognition of impairment losses in future periods and could be material. Income Taxes
The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management continues to review the level of the valuation allowance on a quarterly basis. There can be no assurance that the Company's future operations will produce sufficient earnings to allow for the deferred tax asset to be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets. Each year the Company files income tax returns in the various taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company's financial statements in accordance with ASC 740. The Company applies this guidance by defining criteria that an individual income tax position must meet for any part of the benefit of that position to be recognized in an enterprise's financial statements and provides guidance on measurement, de-recognition, classification, accounting for interest and penalties, accounting in interim periods, disclosure, and transition.
Discussion of Operating Results From Continuing Operations
After the acquisition of Ample Hills on
July 9, 2020, the Company determined they have two segments: the Measurement Segment and the Ice Cream Segment. On April 14, 2022, the Company announced its intention to focus on the Ice Cream Segment as its core business and simultaneously launch a strategic review of the Company's Measurement Segment, including the Xact and Acuity business lines. Management anticipates disposing of the Measurement Segment through multiple transactions involving the sale of legal entities, assets, or a combination thereof. In accordance with ASC 205-20, Presentation of Financial Statemen-s - Discontinued Operations, the Company determined that the Xact business line met the conditions for a discontinued operation and is recorded as such in the consolidated financial statements. The Company reports financial results for discontinued operations separately from continuing operations in order to distinguish the financial impact of the potential disposal transaction from ongoing operations. Prior financial information has been updated to reflect the required presentation for discontinued operations under ASC 205-20. See Note 4 - Assets Held for Sale and Operations Classified as Discontinued Operations for further details. COVID-19 Update As of May 31, 2022, all of our manufacturing facilities and retail shops were operational (except for new leases with shop openings forthcoming) . Throughout the COVID-19 pandemic, the Company has been adhering to mandates and other guidance from local governments and health authorities, including the World Health Organizationand the Centers for Disease Control and Prevention. The Company has taken extraordinary measures and invested significantly in practices to protect employees and reduce the risk of spreading the virus, while continuing to operate where permitted and to the extent possible. These actions include additional cleaning of our facilities, staggering crews, incorporating visual cues to reinforce social distancing, providing face coverings and gloves, as well as implementing daily health validation at our manufacturing and office facilities. We expect to continue to incur costs to maintain these precautionary measures for the foreseeable future. The health and safety of our employees and our communities is our highest priority. 23 Table of Contents Key Leadership Changes
October 22, 2021, the Company announced the appointment of Alex Zyngierto the Company Board of Directors, effective October 22, 2021. Mr. Zyngierreplaces Steven Strom, whoresigned from the Board of Directors. On September 30, 2022, Lillian Tungtendered her resignation from the Board of Directors of the Company. Neither Ms. Tung'snor Mr. Strom'sresignation was the result of any disagreements with the Company on any matters relating to its operations, policies and practices. Andrew Hines'term as member of the Board of Directors ended on December 10, 2021as he did not stand for re-election at the Company's 2021 annual meeting of the shareholders. His former seat remains vacant as of May 31, 2022. 24 Table of Contents
RESULTS OF OPERATIONS
Fiscal Year ended May 31, YoY Change 2022 % 2021 % $ % Ice Cream Segment revenues
$ 8,315,48684.1 % $ 4,043,43672.2 % $ 4,272,050105.7 % Measurement Segment revenues 1,577,724 15.9 % 1,557,023 27.8 % 20,701 1.3 % Total revenue, net 9,893,210 100.0 % 5,600,459 100.0 % 4,292,751 76.6 % Cost of revenue 4,824,639 48.8 % 3,535,778 63.1 % 1,288,861 36.5 % Gross profit 5,068,571 51.2 % 2,064,681 36.9 % 3,003,890 145.5 % Selling, general and administrative 15,644,001 158.1 % 11,398,113 203.5 % 4,245,888 37.3 % Impairment of intangible assets - 0.0 % 903,422 16.1 % (903,422 ) (100.0 %) Transaction costs - 0.0 % 125,167 2.2 % (125,167 ) (100.0 %)
Research & development 40,456 0.4 % 69,601
1.2 % (29,145 ) (41.9 %) Total operating expenses 15,684,457 158.5 % 12,496,303 223.1 % 3,188,154 25.5 % Operating loss (10,615,886 ) (107.3 %) (10,431,622 ) (186.3 %) (184,264 ) (1.8 %) Gain on sale of
property and equipment 4,598,095 46.5 % 24,208 0.4 % 4,573,887 100.0 % Forgiveness of PPP loans 2,059,556 20.8 % - 0.0 % 2,059,556 100.0 % Bargain purchase gain - 0.0 % 1,138,808 20.3 % (1,138,808 ) 100.0 % Interest expense (46,828 ) (0.5 %) (19,038 ) (0.3 %) (27,790 ) 146.0 % Other income, net 315,376 3.2 % 248,815 4.4 % 66,561 (26.8 %) Loss before income taxes from continuing operations (3,689,687 ) (37.3 %) (9,038,829 )
(161.4 %) 5,349,142 59.2 % Income tax provision (benefit) from continuing operations 19,197 0.2 % (403,666 ) (7.2 %) 422,863 (104.8 %) Net loss from
continuing operations (3,708,884 ) (37.5 %) (8,635,163 ) (154.2 %) 4,926,279 57.0 % Income from discontinued operations, net of tax 425,108 4.3 % 545,491 9.7 % (120,383 ) 22.1 % Net loss
$ (3,283,776 )(33.2 %) $ (8,089,672 )
$ 4,805,89659.4 %
Fiscal Year Ended
Consolidated Revenue - Consolidated revenue increased
$4,292,751, or 76.6%, to $9,893,210in Fiscal 2022 from $5,600,459in Fiscal 2021. The increase was driven by the Ice Cream Segment, which generated $8,315,486in sales during Fiscal 2022, accounting for 84.1% of total revenue for the fiscal year. The Measurement Segment sales remained steady at $1,577,724for Fiscal 2022, a slight increase of $20,701over prior Fiscal 2021 of $1,557,023. The Measurement Segment accounted for 15.9% of total revenue in Fiscal 2022. Ice Cream Segment Revenue - The Ice Cream Segment encompasses the operations of Ample Hills and focuses on the wholesale and retail sales of their ice cream and related products through a network of individual retail locations located in New York, New Jerseyand California, in addition to sales on the Company's website. Revenues for the Ice Cream Segment for Fiscal 2022 increased $4,272,050, or 105.7%, to $8,315,486, as compared to $4,043,436in Fiscal 2021. Measurement Segment Revenue - The Measurement Segment includes one product line: the Acuity product line, which focuses on laser-based distance measurement and dimensional sizing laser sensors. The Xact product line, which includes ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the IoT environment, is classified as "held for sale" and reported separately. See Note 4 - Assets Held for Sale and Operations Classified as Discontinued Operations for further details. All activity in the Company's Measurement Segment was conducted in North Americain Fiscal 2022 and Fiscal 2021.
Measurement Segment Revenue increased
2022 as compared to
25 Table of Contents
Gross Profit – Consolidated gross profit for Fiscal 2022 is 51.2%, as compared
to 36.9% in Fiscal 2021, primarily due to higher gross margins from the Ice
Measurement Segment gross profit for Fiscal 2022, consisting solely of the Acuity business as Xact is classified separately as held for sale, increased by 10.3% to 40.7% as compared to 30.4% in Fiscal 2021. The increase was due to implemented bill of material efficiencies which improved Acuity unit costs
Ice Cream Segment gross profit increased by 13.8% to 53.4% in Fiscal 2022, as compared to 39.4% in Fiscal 2021. As the Company continues to strive for efficiencies in the day-to-day operations of the business, the Company expects to be able to manage costs and identify opportunities to drive additional revenue and volume through their factory, which will further improve gross margin. Operating Expenses - Consolidated operating expenses increased
$3,188,154, or 25.5% to $15,684,457in Fiscal 2022 compared to $12,496,303in Fiscal 2021. This increase was primarily due to the Ice Cream Segment, which had operating expenses of $12,019,919in Fiscal 2022, representing a $2,608,472, or 27.7%, increase from $9,411,447in Fiscal 2021. The Ice Cream Segment accounted for 76.6% of total operating expenses. Operating expenses for the Measurement Segment increased $579,682or 18.8%, to $3,664,538in Fiscal 2022 from $3,084,856in Fiscal 2021. The operating expense increase was driven by professional fees increase of $1,161,466, or 67.7%, to $2,876,174in Fiscal 2022, as compared to $1,714,708in Fiscal 2021.
Other Income – Other income primarily consists of rental income, interest income
and other income. Other income was
Interest expense was
Income Tax Provision (Benefit from Income Taxes) -- The effective tax rate in Fiscal 2022 was (0.59%), as compared to 4.7% in Fiscal 2021. The effective tax rate on consolidated net loss in Fiscal 2022 and 2021 differs from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and the impact of certain expenses not being deductible for income tax reporting purposes. Net loss - Net loss in Fiscal 2022 was
$3,283,776, or $0.97per fully diluted share, and net loss in Fiscal 2021 was $8,089,672, or $2.29per fully diluted share. The decrease in net loss for Fiscal 2022 was primarily due to the Company's $4,598,095gain on sale of property and equipment and $2,059,556forgiveness of PPP loans in Fiscal 2022. NON-GAAP FINANCIAL MEASURES Adjusted EBITDA - Adjusted EBITDA, which excludes certain reorganization, legal and other professional expense and inventory adjustments, was ( $9,743,929) for Fiscal 2022 as compared to Adjusted EBITDA of ( $8,419,539) in Fiscal 2021.
Reconciliation of EBITDA to Adjusted EBITDA – Adjusted EBITDA for Fiscal 2022
and Fiscal 2021 is calculated as follows on a consolidated basis:
Fiscal Year Ended
May 31, 20222021
Loss before income taxes from continuing operations
Depreciation and amortization
Interest Expense 46,828
EBITDA from continuing operations
$ (3,205,676 ) $ (8,575,865 )Adjusted for: Gain on sale of property and equipment (4,598,095 )
- Forgiveness of PPP loans (2,059,556 ) - Bargain purchase gain - (1,138,808 )
Impairment of intangible assets -
Stock-based compensation 119,398
Income from discontinued product line Reorganization, legal, and transaction fees -
Adjusted EBITDA from continuing operations
$ (9,743,929 ) $ (8,419,539 )26 Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
The Company’s working capital decreased
of Fiscal 2022 compared to
decrease in working capital in Fiscal 2022 was primarily the result of the
· Cash and cash equivalents decreased
Fiscal 2022 as compared to
$4,032,690at the end of Fiscal 2021.
· Accounts payable increased
as compared to
· Other accrued liabilities increased
Fiscal 2022 as compared to
$694,590at the end of Fiscal 2021.
· Current portion of long-term lease liabilities increased
of Fiscal 2021.
· Prepaid expenses decreased
as compared to
$198,345at the end of Fiscal 2021.
These decreases were partially offset by the following:
· Inventories increased
$1,251,422at the end of Fiscal 2021. Net cash used in operating activities for continuing operations was $8,096,389in Fiscal 2022 as compared to net cash used in operating activities for continuing operations of $7,466,978in Fiscal 2021. The net loss of $3,283,776, a gain on sale of property and equipment of $4,598,095, an increase in accounts receivable of $22,684, an increase in rent, utility deposits and ERP deposits of $239,105, an increase in inventories of $192,107, and the forgiveness of PPP loans of $2,059,556were the primary drivers of the overall operating cash usage for Fiscal 2022, offset by non-cash lease costs of $365,856, depreciation and amortization of $437,183, stock based compensation expense of $119,398, a decrease in prepaid expenses of $103,698, a decrease in income tax receivable of $21,196, an increase in accrued liabilities and customer deposits of $989,076and an increase in accounts payable of $262,527. In Fiscal 2021, the net loss of $8,089,672, a bargain purchase gain of $1,138,808, an increase in accounts receivable of $730,971, a decrease in deferred income taxes of $453,238, an increase in rent, utility deposits and ERP deposits of $206,628, and increase in inventories of $153,955and an increase in prepaid expenses of $84,388were the primary drivers of the overall operating cash usage for Fiscal 2021, offset by an impairment of indefinite-lived intangible assets of $903,422, non-cash lease costs of $735,709, depreciation and amortization of $443,926, stock based compensation expense of $266,545, an increase in accrued liabilities and customer deposits of $799,862, and an increase of accounts payable of $330,945were the primary drivers of the overall operating cash usage for Fiscal 2021. Net cash provided by investing activities was $3,801,019in Fiscal 2022 as compared to net cash used in investing activities of $3,035,184for Fiscal 2021. The net cash provided by investing activities for Fiscal 2022 is driven by the $4,797,924proceeds from the sale of property and equipment, offset by the $996,905purchases of property and equipment, used primarily to build out the Ample Hills retail footprint. Net cash provided by financing activities was $1,264,476in Fiscal 2022 as compared to net cash provided by financing activities of $3,441,305for Fiscal 2021. The net cash provided by financing activities was due to the proceeds from a $1,000,000promissory note and $264,476proceeds from the Paycheck Protection Program. Management is pursuing multiple sources of liquidity. On April 14, 2022, Schmitt announced its intention to focus on Ample Hills as its core business. In conjunction with the focus on Ample Hills, the Company also announced the strategic review of its Measurement segment, which could result in a sale of one or both of those businesses. On May 2, 2022, the Company filed a shelf registration statement for the sale of up to $100,000,000in debt and equity securities. On May 20, 2022, the Company entered into a sales agreement with Roth Capital Partners, LLCand filed a prospectus supplement for an at-the-market offering of up to $5,000,000in common stock. 27 Table of Contents
Historically, the Company's primary sources of liquidity have been cash and cash equivalents, cash flows from operations (when available) and cash flows from investing and financing activities, including proceeds from the sale of property and equipment, funding under business loans and credit agreements and the sale of equity securities.
The Company currently projects that it will need additional capital to fund its current operations and capital investment requirements until the Company scales to a revenue level that permits cash self-sufficiency. As a result, the Company needs to raise additional capital or secure debt funding to support on-going operations until such time. This projection is based on the Company's current expectations regarding product sales and service, cost structure, cash burn rate and other operating assumptions. The sources of this capital are anticipated to be from the sale of equity and/or debt. Alternatively, or in addition, the Company may seek to sell additional assets or portions of its business. Any of the foregoing may not be achievable on favorable terms, or at all, and may require the consent of current debt and/or equity holders to the modification of existing agreements, which may or may not be granted. Additionally, any debt or equity transactions may cause significant dilution to existing stockholders .
Recently Issued Accounting Guidance
Refer to Note 3 – Summary of Significant Accounting Policies in the accompanying
Notes to the Consolidated Financial Statements for a discussion of recent
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