2. Liquidity

FASB Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements – Going Concern, requires that management evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued. Based upon the analysis set forth below, management believes there is not substantial doubt about the Company’s ability to continue as a going concern and to meet the obligations as they become due within the next twelve months from the date of financial statement issuance.

As part of the evaluation, management considered that on December 31, 2017, the Company had $4.4 million of cash and had no amounts drawn on its line of credit with Silicon Valley Bank (“SVB”). Net cash provided by operating activities was approximately $282,000 for the year ended December 31, 2017. At December 31, 2017, the Company had a positive working capital of approximately $4.6 million. The loss before income taxes was $5.5 million for the year ended December 31, 2017, of which $4.3 million represents non-cash depreciation and amortization expenses.

During the year of 2017, the Company raised $18.4 million in net proceeds from a series of equity financings. In May 2017, the Company completed a registered direct offering of one million shares of its common stock at $2.30 per share, raising net proceeds of approximately $2.0 million. Between June and December 2017, the Company completed six public offerings of approximately 765,000 shares of its 11% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Preferred Stock”) at $25.00 per share, raising net proceeds of approximately $16.4 million.

These equity financings improved the financial and liquidity position of the Company and allowed the Company to repay the amounts owed to Prudential Insurance Company of America and Prudential Retirement Insurance and Annuity Company (together, “Prudential”) and Opus Bank (“Opus”). In October 2017, the Company entered into a new credit facility with SVB and repaid and terminated its previous facility with Opus. The SVB credit facility is a $5 million secured revolving line of credit where borrowings are based on a formula of 200% of repeatable revenue adjusted by an annualized attrition rate as defined in the credit facility agreement. The full $5 million facility is currently available to the Company. Management continues to focus on the Company’s overall profitability, including growing revenue and managing expenses, and expects that these efforts will continue to enhance our liquidity and financial position. Management has based its expectations on assumptions that may prove to be wrong.