Note 2 - Liquidity and Managements' Plans

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

Note

2

– Liquidity and Managements’ Plans

As of

December

31,

2016,

the Company’s available liquidity was

$5.15

million, which was substantially comprised of

$4.5

million of availability on the credit facility and

$620,000

in cash. The Company continues to borrow from the credit facility to fund working capital needs and to shore-up operating losses. As of

March

3,

2017,

our liquidity decreased by

$545,000

which consisted of credit facility availability of

$3.06

million and cash of

$542,000.

The Company has incurred substantial losses from years ended

December

31,

2016

and

2015

and negative cash from operations in

2016

of

$1.9

million. The Company’s current operating plan indicates that it will continue to incur losses from operations

On

March

31,

2017,

the Company entered into the Tenth Amendment to the

2014

Credit Agreement that among other things (i) required the Company to raise

$1.5

million in subordinated debt or post a letter of credit in favor of the bank by

March

31,

2017;

(ii) raise an additional

$1

million of subordinated debt by

May

15,

2017;

(iii) reduced the maturity date of the loan from

September

12,

2019

to

April

30,

2018;

(iv) changed the definition of Adjusted EBITDA to include proceeds from subordinated debt; and (v) change the calculation of fixed charge and leverage ratio from a trailing

four

-quarter basis to a quarterly build from the quarter ended

December

31,

2016.

On

March

31,

2017,

the Company’s largest shareholder posted a letter of credit in the amount of

$1.5

million in accordance with the terms of the Tenth Amendment. It is expected that the letter of credit will be converted into subordinated debt with a maturity dated on or about

April

15,

2022

with a stated interest rate of

12%

per annum.

As a result of moving the maturity date to

April

30,

2018,

the entire loan balance (approximately

$25.7

million as of

March

28,

2017)

will be classified as a current liability beginning in

May

2017.

The Company is exploring alternatives for other sources of capital to reduce or replace the PNC credit facility and fund obligations. The Company is working to improve its operating performance and its cash, liquidity and financial position. This includes: (i) improving labor and equipment utilization rates; (ii) selling certain assets of the Company; and (iii) exploring additional bank relationships.

However, there can be no assurance that management’s plan to improve the Company’s operating performance and financial position will be successful or that the Company will be able to obtain additional financing or more favorable covenant requirements. As a result, the Company’s ability to pay its obligation and meet its covenant requirement can be adversely affected.