Note 2 - Going Concern Considerations and Management's Plan

6 Months Ended

Jun. 30, 2013

Policy Text Block [Abstract]

Liquidity Disclosure [Policy Text Block]

2. Going Concern Considerations and Management’s Plan

As shown in the accompanying Condensed Consolidated Financial Statements, the Company incurred a net loss of $6.8 million and $10.0 million during the three and six months ended June 30, 2013, respectively, and has an accumulated deficit of $33.8 million as of June 30, 2013. Working capital levels have decreased significantly from positive $61.1 million at December 31, 2011 to negative $29.8 million at June 30, 2013. The Company’s parent company, LDK Solar Co., Ltd. (“LDK”), who owns approximately 71% of the Company’s outstanding Common Stock, has disclosed publicly that it had a net loss and negative cash flows from operations for the year ended December 31, 2012 and has a working capital deficit and was not in compliance with certain financial covenants on its indebtedness at December 31, 2012. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. While management of the Company believes that it has a plan to satisfy liquidity requirements through September 30, 2013, there is no assurance that its plan will be successfully implemented. The Company is experiencing the following risks and uncertainties in the business:

• China Development Bank (“CDB”) has provided financing for construction and project financing on certain development projects in the past. They have also executed non-binding term sheets for other projects, but there is no assurance that the projects in process will be funded. CDB has been financing the Company’s projects primarily as a result of the fact that the Company’s majority shareholder is LDK and CDB has a long term relationship with LDK. Due to LDK’s financial difficulties, certain financing of the Company’s projects have been delayed. If CDB will no longer provide financing for the projects, the Company will need to seek construction financing from other sources which could be very difficult given the Company’s financial condition and LDK’s majority ownership of the Company. The company has substantially completed projects in Greece with a customer that is requesting debt term financing from CDB. If CDB does not provide the term financing, then the Company will collect its outstanding receivables from the operation’s cash proceeds over an extended period of time of up to six years. The company has also completed an additional commercial scale project in New Jersey with KDC Solar, which is currently waiting debt term financing from CDB. If CDB does not provide the term financing, then the Company will collect its outstanding notes receivables from the operation’s cash proceeds over an extended period of time of up to fifteen years or seek alternative bank debt term financing options which may affect its ability to repay the CDB construction finance facilities of December 31, 2011.

• A key term of existing project financing with CDB is that the Company must use solar panels manufactured by LDK. Currently, however, LDK has demanded payment in advance in order to procure their solar panels. If the Company is unable to make advance payments required, the Company has and will continue to need to request its customers to make the required cash payments for the LDK solar panels to be utilized in projects under development. The Company continues to maintain relationships with other solar panel manufacturers when circumstances call for an alternative to LDK’s line of solar panels.

• In December 2012, the Company amended the Business Loan Agreement (the "Loan Agreement") entered into with Cathay Bank ("Cathay") on December 26, 2011. Under the original terms of the Loan Agreement, Cathay agreed to extend the Company a line of credit of the lesser of $9.0 million or 70% the aggregate amount in certain accounts, which was to mature on December 31, 2012. LDK, the majority shareholder of the Company, agreed to guarantee the full amount of the loan under a Commercial Guaranty by and between LDK and Cathay dated December 26, 2011. Under the terms of the amended Loan Agreement, the facility amount was reduced to the then current balance outstanding of $7.0 million, with a variable interest rate of 2.00 percentage points above the prime rate and a 6.00 percentage point floor rate. In addition, the maturity date was extended to June 30, 2013 with principal payments of $0.5 million due each month beginning December 31, 2012. The covenants of the Loan Agreement were amended to include, among other items, the subordination of the net accounts payable due to LDK. In addition, under the Commercial Security Agreement dated December 26, 2011 (the "Security Agreement"), the Company granted Cathay a security interest in the Collateral (as defined in the Security Agreement), which Cathay can close on in the event of a default under the Loan Agreement. In the event that the Company does not make the principal payment, the bank could issue a notice of default and declare the amounts immediately due and payable. If the Company cannot remedy the default, the Company currently does not have the ability to make the payments without additional sources of financing or accelerating the collection of outstanding receivables. The Company has not made a payment since April 2013 and is, therefore, several months in arrears. The loan is currently past due and the Company failed certain bank covenants as of June 30, 2013. On August 15, 2013, the Company entered into an agreement with Cathay whereby Cathay agreed, subject to certain conditions precedent, to forbear from foreclosing on the security interest securing the Loan Agreement until September 30, 2013. In connection with the forbearance, the Company agrees to pay Cathay the outstanding and unpaid balance of the loan on September 30, 2013. In addition, as of August 15, 2013, the interest rate under the loan equals 11 percent. All proceeds from the sale of projects and any payments received from KDC shall be applied to loan payment.

• The Company’s existing CDB loans and Cathay line of credit contain material adverse change (“MAC”) clauses under which the banks can declare amounts immediately due and payable. Due to the subjectivity of the MAC clauses, it is not clear whether the events described above would represent a material adverse change. Should the banks declare amounts immediately due and payable under the MAC clauses, the Company does not have the ability to make the payments without additional sources of financing or accelerating the collection of its outstanding receivables.

• As of June 30, 2013, the Company had accounts payable to LDK of $47.6 million comprised of $41.5 million due to LDK primarily related to U.S. and Greek project solar panel purchases and $6.1 million due to LDK for solar panels purchased for various Italian solar development projects. Of the $47.6 million due to LDK noted above, the entire amount is currently contractually past due and payable to LDK. Payment for the solar development project related panels was contractually due to LDK within four months of their purchases; however the payment terms with the customer were negotiated to be collected within nine to twelve months from sale. Although this portion of the payable to LDK is currently contractually past due, LDK has not demanded payment. Although there are no formal agreements, LDK has verbally indicated that it will not demand payment until the receivable from the customer has been collected. Should LDK change its position and demand payment for the past due amount prior to collection of the related receivable from the customer, the Company currently does not have the ability to make the payment currently due without additional sources of financing or accelerating the collection of our outstanding receivables.

• With LDK as a majority shareholder, the significant risks and uncertainties noted at LDK could have a significant negative impact on the financial viability of the Company as well as indicate an inability for LDK to support the Company’s business.

• A Customer has informed us that they plan to return $2.9 million in solar panels purchased in 2011. The customer alleges that the panels are defective, but the Company believes that the Customer is just trying to return product from a cancelled project. While the Company has set-up a bad debt reserve of $2.9 million dollars as a result it will vigorously pursue collection of the outstanding debt obligation and filed a complaint on July 26, 2013 to obtain full payment.

The significant risks and uncertainties described above could have a significant negative impact on the financial viability of the Company and raise substantial doubt about the Company’s ability to continue as a going concern. Management has made changes to the Company’s business model to increase working capital by managing cash flow, securing project financing before commencing further project development, and requesting that the Company’s customers make cash payments for solar panels for projects under development. If the noted banks should call the debt or LDK demand payment of amounts owed by the Company prior to collection of the related receivables, management plans to obtain additional debt or equity financing. There is no assurance that management’s plans to accelerate the collection of outstanding receivables or to obtain additional debt or equity financing will be successfully implemented, or implemented on terms favorable to the Company. As of June 30, 2013 and December 31, 2012, the Company had $0.2 million and $17.8 million, respectively, in cash and cash equivalents. The Company expects that anticipated collections of trade accounts receivable will sustain it at least through the third quarter of 2013. The Condensed Consolidated Financial Statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might result from the outcome of this uncertainty.