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Management Discussion

• Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
• In light of the uncertainty in the economy during the COVID-19 global pandemic, the Company undertook several actions to strengthen its financial positions and balance sheet including issuing debt, reducing operating expenses, and prioritizing capital expenditures. While the Company has the ability to continue to take more of these actions, if needed, it also has the ability to borrow under its existing $2.5 million revolving credit facility that matures on January 31, 2023. At December 31, 2020, the Company had no outstanding drawings against the revolving credit facility and had cash of approximately $2.1 million. Overall, the Company believes that the available cash, cash flows generated from future operating activities and borrowing capacity will provide the Company with continued financial viability and adequate liquidity to fund its operations and support its growth. The Company’s cash requirements are subject to change as the business conditions change. As the COVID-19 global pandemic is complex and rapidly evolving, the Company's plans may change. Although the Company saw positive momentum and improved cash generated from operating activities over the second half of 2020, the Company is still unable to predict the duration and severity of this pandemic, which could have a material adverse impact on the Company’s future sales, results of operations, financial position and cash flows, particularly if the global pandemic continues to exist or worsens for a prolonged period of time, or if plans to administer vaccines are delayed. Any such material adverse impacts could result in the Company's inability to satisfy credit facility covenants and could limit the ability to make future borrowings under credit lines.
• Our significant accounting policies are described in Note 1 to our financial statements for the years ended December 31, 2020 and 2019. The application of these policies requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on a combination of historical experience and reasonable judgment applied to other facts. Actual results may differ from these estimates, and such differences may be material to the financial statements. In addition, the use of different assumptions or judgments may result in different estimates. We believe our critical accounting policies that are subject to these estimates are: Revenue Recognition and Accounts Receivable Reserves, Inventory Valuation, Stock-Based Compensation, Income Taxes and Valuation of Goodwill.