Note 2 - Assessment of Liquidity and Management's Plans
|9 Months Ended|
Oct. 01, 2017
|Notes to Financial Statements|
|Substantial Doubt about Going Concern [Text Block]||
October 1, 2017,the Company’s liquidity is comprised of
$2,935in cash on hand and
$7,106of funds available to borrow under the Company’s revolving credit facility (“PNC Revolving Credit facility”). The Company funds its operations by regularly utilizing its PNC Facilities (as defined below, refer to Note
5). The Company manages its capital requirements through budgeting and forecasting processes while monitoring for compliance with bank covenants under the PNC Facilities. Funds available under the PNC Revolving Credit Facility are managed on a weekly basis based on the cash flow requirements of the various operating segments. Cash collected from business operations is immediately applied towards paying down the PNC Revolving Credit Facility, which has a maximum limit of
$7,106in funds were available to borrow as at
October 1, 2017which was limited by certain borrowing base restrictions under the PNC Facilities.
The Company has experienced significant reductions in revenue throughout
2017when compared to prior periods, which significantly impacts its operating cash flows. The Company incurred a net loss of
$344for the year ended
January 1, 2017and a net loss in the
$6,941.Revenues have declined due to the loss of customers that represented a large concentration of the Company’s business. The Company believes this loss of customers is largely due to competitive pressures from larger organizations. The decline in revenues has directly impacted the Company’s gross profit and its ability to generate cash flows from operations.
the Company’s results of operations in this challenging business environment, in accordance with ASC
40management is required to consider whether these conditions give rise to substantial doubt about the Company’s ability to meet its obligations within
oneyear from the financial statement issuance date, and if so, whether management’s plans to negate these conditions will alleviate this substantial doubt.
In order to address the Company
’s liquidity, on
May 15, 2017,the Board of Directors of the Company approved a corporate restructuring plan (the “Restructuring Plan”) for its manufacturing facilities and corporate level operations, which included the closure of the Suzhou, China facility (“Suzhou Facility”) and a reduction in its labor force. The Restructuring Plan has delivered cost savings during the quarter and is expected to deliver annualized cost savings during the remainder of
2017and thereafter. The Restructuring Plan, including the wind down and closure of the Suzhou Facility was initiated in the
2017and was substantially completed at the end of the
May 15, 2017,the Company entered into the Twelfth Amendment to the PNC Facilities, which amended its financial covenant requirement for the quarter
April 2, 2017and adjusted these financial covenant requirements and conditions for future periods as well (refer to note
5). The Company is in compliance with the financial covenants included in the PNC Facilities as at
October 1, 2017.The Company anticipates that it will continue to be in compliance with the amended financial covenants in the PNC Facilities.
In accordance with Accounting Standards Codification
40,the Company believes that the actions described above are probable of mitigating substantial doubt about the Company’s ability to meet its obligations within
oneyear from the financial statement issuance date. Management believes that the revised
2017forecast and budget, specifically as it relates to cost reduction initiatives, liquidity and working capital management has been effectively implemented and that, when combined with the Twelfth Amendment to its PNC Facilities and the Restructuring Plan, it is probable that these actions will mitigate any substantial doubt and satisfy our estimated liquidity needs, for at least but
notlimited to, the next
twelvemonths from the issuance date of these financial statements.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Reference 1: http://www.xbrl.org/2003/role/presentationRef