NOTE 2—LIQUIDITY

The Company’s condensed consolidated financial statements have been prepared on a going concern basis, which assumes that it will be able to meet its obligations and continue its operations during the twelve-month period following the issuance of this Quarterly Report on Form 10-Q for the three months ended March 31, 2018 (this “Form 10-Q”). These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management has assessed the Company’s financial condition and has concluded that the following factors, taken in the aggregate, raise substantial doubt regarding the Company’s ability to continue as a going concern for the twelve-month period following the issuance of this Form 10-Q:

For the past several years, the Company has incurred both net losses and negative cash flows from operations.

For the three months ended March 31, 2018, the Company had a net loss (including discontinued operations) of $4.0 million.

As of both March 31, 2018 and December 31, 2017, Electrical Solutions was classified as held-for-sale and presented as a discontinued operation. However, the Company continues to incur operating losses at its Electrical Solutions Houston facility.

The Company’s liquidity has been, and is currently projected to remain, very constrained. The Company’s lack of access to readily available capital resources and unexpected delays in collecting projected cash receipts could create significant liquidity problems.

Under the Centre Lane Facility (as defined below), tax refunds and/or any extraordinary receipts in excess of $0.5 million in the aggregate in any fiscal year, with the exception of $3.7 million of extraordinary receipts waived in the Fourth Amendment (as defined below), must be used to prepay amounts outstanding under the Centre Lane Facility.

The Fourth Amendment to the Centre Lane facility requires prepayment of all outstanding amounts due and payable on the earlier of (i) May 31, 2019 (although that date is just outside the ensuing twelve month period following the date this Form 10-Q is filed) (ii) the date Williams Industrial Services Group, LLC and its subsidiaries are sold or (iii) the date of acceleration of the loans pursuant to an additional event of default.

Management’s mitigation plans, which aim to alleviate the factors that caused the substantial doubt, include the following:

In April 2018, as part of the Fourth Amendment to the Centre Lane Facility, the Company negotiated a $3.0 million Incremental Loan Commitment the Company can draw upon in minimum increments of $1.0 million. This Loan Commitment can provide emergency funding to the Company in the event of a cash shortfall.

The Company is aggressively pursuing the sale of Electrical Solutions. Additionally, the Company has initiated the closure of a certain leased facility to streamline its operations in an effort to curtail further losses and negative cash flows.

With the more streamlined company structure resulting from the completed disposal of Mechanical Solutions and the anticipated disposal of Electrical Solutions, the Company began implementing its plan to significantly reduce the corporate headquarters costs, including headcount, in April 2018.

While management believes its mitigation plans alleviate the substantial doubt regarding the Company’s ability to continue as a going concern during the ensuing twelve-month period, the Company may not ultimately be able to successfully implement these plans, and investors could lose the full value of their investment in the Company’s common stock if bankruptcy protection is ultimately sought.