Note 2 - Liquidity and Managements' Plans

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

Note

2

– Liquidity and Managements’ Plans

As of

June 30, 2017,

the Company’s available liquidity was approximately

$2.1

million, which was substantially comprised of

$1.5

million of availability under our credit facility (the "Prior Credit Facility") provided pursuant to the Amended and Restated Revolving Credit and Security Agreement with PNC Bank, N.A. (the

“2014

Credit Agreement”) and approximately

$621,000

in cash. During the

six

months ended

June 30, 2017,

the Company repaid approximately

$3.5

million under the Prior Credit Facility using proceeds from subordinated debt borrowings and net cash provided by our operations (partially offset by interest expense accrued to the borrowing balance). 

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) changed 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.

As described in more detail in Note

5,

the Company complied with such requirements. However, upon entering the Tenth Amendment, the Company determined that the Prior Credit Facility did

not

provide sufficient liquidity on an ongoing basis, and that cash flow from operations and other sources would

not

generate sufficient cash to cover current obligations, most notably the maturity of the Prior Credit Facility provided under the

2014

Credit Agreement in

April 2018. 

Due to the decreased term and restrictions imposed by the lender upon entering the

10th

Amendment, during the

six

months ended

June 30, 2017,

the Company began exploring alternative financing to provide ongoing liquidity with more favorable terms with regards to availability of credit, borrowing costs, and covenants. 

As described in more detail in Note

13,

Subsequent Events

, subsequent to

June 30, 2017,

the Company entered into a

Loan and Security Agreement

(the

"2017

Credit Agreement")

 with East West Bank, a California banking corporation

 ("East West Bank"), 

which provides for a

three

-year

$30

million senior secured revolving credit facility (the “New Credit Facility”)

. On

August 10, 2017

we repaid all amounts due under the Prior Credit Facility using proceeds from New Credit Facility, and therefore have classified the

$20.4

million loan balance outstanding under the Prior Credit Facility as a long-term liability in the accompanying consolidated balance sheet. Upon entering the

2017

Credit Agreement and repaying all amounts due pursuant to the

2014

Credit Agreement, we had availability of approximately

$4.7

million under the New Credit Facility.