Note 4 - Going Concern and Subsequent Event

12 Months Ended

Jan. 31, 2023

Notes to Financial Statements

Liquidation Basis of Accounting [Text Block]

4. Going Concern and Subsequent Event

On February 2, 2023, the Company and Klein (collectively, the “Borrowers”), entered into a $3.75 million Loan and Security Agreement (the “Loan”) with Sachem Capital Corp., (the “Lender”). The Loan is due February 1, 2024, and bears interest at 12.9% per annum, payable monthly. However, the Borrowers have prepaid interest through maturity. In addition, the Borrowers have paid the Lender an origination fee equal to $240,000.  The Loan may be prepaid at any time without penalty.

The Loan is secured by mortgages on certain real estate owned by the Borrowers. The Loan contains terms customary with this type of transaction including representations, warranties, covenants, and reporting requirements.

The Company has a history of generating operating losses and negative cash from operating activities and has relied on cash from the sale of lease pool equipment and the sale of Preferred Stock and Common Stock for the past several years. As of January 31, 2023, the Company has some remaining lease pool equipment available for sale and has approximately 317,000 shares of Preferred Stock and approximately 22.1 million shares of Common Stock available for issuance. However, there can be no assurance the remaining lease pool equipment will be sold or that the Preferred Stock or Common Stock can be sold at prices acceptable to the Company.

The above factors create substantial doubt regarding the Company’s future financial results and liquidity. As such, there is substantial doubt as to the Company’s ability to continue as a going concern.

Management has identified the following mitigating factors regarding adequate liquidity and capital resources to meet its obligations:

• The Company has no obligations or agreements containing “maintenance type” financial covenants.

• The Company has working capital of approximately $13.3 million as of January 31, 2023, including cash of approximately $778,000.

• Should revenues be less than projected, the Company believes it is able, and has plans in place, to reduce costs proportionately in an effort to maintain positive cash flow.

• The majority of the Company’s costs are variable in nature, such as raw materials and personnel related costs. The Company has recently eliminated two executive level positions, and additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management.

• The Company has a backlog of orders of approximately $20.7 million as of January 31, 2023, which is an increase of approximately 58% from the $13.1 million reported at January 31, 2022. Production for certain of these orders was in process and included in inventory as of January 31, 2023, thereby reducing the liquidity needed to complete the orders. 

• The Company declared and paid the quarterly dividend on its Preferred Stock for the first quarter of fiscal 2023, and each quarter in fiscal 2022, but deferred payment of the quarterly dividend for the second, third and fourth quarters of fiscal 2023 and the first quarter of fiscal 2024. The Company also has the option to defer future quarterly dividend payments if deemed necessary. The dividends are a cumulative dividend that accrue for payment in the future. During a deferral period, the Company is prohibited from paying dividends or distributions on its common stock or redeeming any of those shares. Further, if the Company does not pay dividends on its Series A Preferred Stock for six or more quarters, the holders of Series A Preferred Stock will have the right to appoint two directors to the Company’s board.

Notwithstanding the mitigating factors identified by management, there remains substantial doubt regarding the Company’s ability to meet its obligations as they arise over the next twelve months.