Press Release
On March 2, 2023, the Company issued
a press release announcing the amendments to the credit agreements, among other things. A copy of the press release is attached hereto
as Exhibit 99.1 and is incorporated herein by reference.
Liquidity Update
In providing this liquidity update, reference
is made to the Company’s Current Report on Form 8-K filed with the SEC on January 11, 2023 (the “Prior Report”).
This update should be read together with the Prior Report and the Company’s Quarterly Report on Form 10-Q for the period ended
September 30, 2022.
As previously reported, the Company’s
January 9, 2023 amendments to the Term Loan Agreement and the Revolving Credit Agreement and the incurrence, as of that date, of
subordinated indebtedness in the principal amount of $750,000 from Wynnefield Partners Small Cap Value, LP and Wynnefield Partners Small
Cap Value, LP I (together, the “Wynnefield Funds”), provided important funding to the Company for use in the ongoing
conduct of its business and were intended to alleviate the Company’s liquidity constraints to an extent sufficient to permit the
Company to continue to operate while it engaged in its previously announced process to explore strategic alternatives for the Company,
including a potential sale.
While continuing to operate its business in
recent months, the Company is implementing various elements of its previously disclosed liquidity improvement plan, which included taking
steps to address profitability of non-performing businesses, aggressively reducing operating expenses, shortening the collection cycle
time on the Company’s accounts receivable, and lengthening the payment cycle time on its accounts payable.
The Company has continued to experience material
intra-week liquidity pressure as it has attempted to manage the short-term negative cash flows that result from, among other things, having
to fund significant weekly craft labor payrolls on large outage projects before those payrolls can be billed to the Company’s customers
and collected. Although the Company has utilized the Revolving Credit Agreement to address such time period negative cash flows, contract
terms restricting customer invoicing frequency, delays in customer payments, and underlying surety bonds have negatively impacted the
Company’s borrowing base and the availability of funds.
The
continuing liquidity pressures resulting from these developments required that the Company negotiate the February 24, 2023 amendments
to the Term Loan Agreement and the Revolving Credit Agreement described in Item 1.01 of this Current Report on Form 8-K.
As previously disclosed, a variety of factors
can affect the Company’s short- and long-term liquidity, the impact of which could be material, including, but not limited to: the
funding of certain of the Company’s previously disclosed loss-contracts; cash required for funding ongoing operations and projects;
matters relating to the Company’s contracts, including contracts billed based on milestones that may require the Company to incur
significant expenditures prior to collections from its customers and others that allow for significant upfront billing at the beginning
of a project, which temporarily increases liquidity in the near term; the outcome of potential contract disputes, which may be significant;
payment collection issues, including those caused by economic slowdowns or other factors which can lead to credit deterioration of the
Company’s customers; required payments of interest under the Term Loan Agreement and the Revolving Credit Agreement and on the Company’s
operating and finance leases; pension obligations requiring annual contributions to multiemployer pension plans; insurance coverage for
contracts that require the Company to indemnify third parties; and issuances of letters of credit.
The
Company believes that the February 24, 2023 amendments to the Term Loan Agreement and the Revolving Credit Agreement described in
Item 1.01 of this Current Report on Form 8-K will, if the discretionary Delayed Draw Term Loans under the Term Loan Agreement
are advanced, provide much needed support to the Company’s ongoing operations and should permit the Company to operate while it
continues to engage in its previously announced process to explore strategic alternatives to maximize value for the Company and its shareholders
or other stakeholders, but additional liquidity support may be necessary. The Company has not disclosed a timetable for the conclusion
of its review of strategic alternatives, nor has it made any decisions related to any further actions or possible strategic alternatives
at this time. The Company does not intend to comment on the details of its review of strategic alternatives until it determines that further
disclosure is appropriate or necessary.
If the Company is unable to address any potential
liquidity shortfalls that may arise in the future, it will need to seek additional funding from third party sources, which may not be
available on reasonable terms, if at all, and the Company’s inability to obtain this capital or execute an alternative solution
to its liquidity needs could have a material adverse effect on the Company’s shareholders and creditors. Importantly, any such additional
funding could only be obtained in compliance with the restrictions contained in the agreements governing the Company’s existing
indebtedness. If the Company is unable to comply with its covenants under its indebtedness, or the lenders under the Term Loan Agreement
do not exercise their discretion to fund the Delayed Draw Term Loans, the Company’s liquidity may be further adversely affected
and could result in an event of default under such indebtedness and the potential acceleration of outstanding indebtedness thereunder
and the potential foreclosure on the collateral securing such debt, and would likely cause a cross-default under the Company’s other
outstanding indebtedness or obligations.
If
the Company’s liquidity improvement plan and the January 9, 2023 and February 24, 2023 amendments to the Company’s
Term Loan Agreement and the Revolving Credit Agreement do not have the intended effect of addressing the Company’s liquidity problems
through its review of strategic alternatives, the Company will continue to consider all strategic alternatives, including restructuring
or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the Company’s business activities and strategic
initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy
Code.
The Company’s continuation as a going
concern is dependent upon its ability to successfully implement its liquidity improvement plan and obtain necessary debt or equity financing
to address the Company’s liquidity challenges and continue operations until the Company returns to generating positive cash flow
or is otherwise able to execute on a transaction pursuant to its review of strategic alternatives, including a potential sale of the Company.
Cautionary Statement
Regarding Forward-Looking Statements
This Current Report on Form 8-K contains
“forward-looking statements” within the meaning of the term set forth in the Private Securities Litigation Reform Act of 1995.
The forward-looking statements include statements or expectations regarding the Company’s liquidity situation and the outcome of
the Company’s review of strategic alternatives, including engaging in a potential sale, restructuring or refinancing its debt, seeking
additional debt or equity capital, reducing or delaying its business activities and strategic initiatives, or selling assets, other strategic
transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code, the Company’s ability to successfully
implement its liquidity improvement plan and, if necessary, to obtain additional funding on reasonable terms, or at all, the Company’s
ability to obtain support from customers in dealing with its liquidity challenges, future demand for the Company’s services, the
Company’s funding levels and ability to continue operations, and expectations regarding future revenues, cash flow, and other related
matters. These statements reflect the Company’s current views of future events and financial performance and are subject to a number
of risks and uncertainties, including the Company’s ability to continue to implement its liquidity improvement plan and to continue
as a going concern; the Company’s level of indebtedness and ability to make payments on, and satisfy the financial and other covenants
contained in, its amended debt facilities, as well as its ability to engage in certain transactions and activities due to limitations
and covenants contained in such facilities; its ability to generate sufficient cash resources to continue funding operations, including
investments in working capital required to support growth-related commitments that it makes to customers, and the possibility that it
may be unable to obtain any additional funding as needed or incur losses from operations in the future; exposure to market risks from
changes in interest rates; the Company’s ability to obtain adequate surety bonding and letters of credit; the Company’s ability
to maintain effective internal control over financial reporting and disclosure controls and procedures; the Company’s ability to
attract and retain qualified personnel, skilled workers, and key officers; failure to successfully implement or realize its business strategies,
plans and objectives of management, and liquidity, operating and growth initiatives and opportunities, including any expansion into new
markets and its ability to identify potential candidates for, and consummate, acquisition, disposition, or investment transactions (including
any that may result from the Company’s review of strategic alternatives); the loss of one or more of its significant customers;
its competitive position; market outlook and trends in the Company’s industry, including the possibility of reduced investment in,
or increased regulation of, nuclear power plants, declines in public infrastructure construction, and reductions in government funding;
costs exceeding estimates the Company uses to set fixed-price contracts; harm to the Company’s reputation or profitability due to,
among other things, internal operational issues, poor subcontractor performance or subcontractor insolvency; potential insolvency or financial
distress of third parties, including customers and suppliers; the Company’s contract backlog and related amounts to be recognized
as revenue; its ability to maintain its safety record, the risks of potential liability and adequacy of insurance; adverse changes in
the Company’s relationships with suppliers, vendors, and subcontractors, including increases in cost, disruption of supply or shortage
of labor, freight, equipment or supplies, including as a result of the COVID-19 pandemic; compliance with environmental, health, safety
and other related laws and regulations, including those related to climate change; limitations or modifications to indemnification regulations
of the U.S.; the Company’s expected financial condition, future cash flows, results of operations and future capital and other expenditures;
the impact of unstable market and economic conditions on our business, financial condition and stock price, including inflationary cost
pressures, supply chain disruptions and constraints, labor shortages, the effects of the Ukraine-Russia conflict and ongoing impact of
COVID-19, and a possible recession; our ability to meet expectations about our business, key metrics and future operating results; the
impact of the COVID-19 pandemic on the Company’s business, results of operations, financial condition, and cash flows, including
global supply chain disruptions and the potential for additional COVID-19 cases to occur at the Company’s active or future job sites,
which potentially could impact cost and labor availability; information technology vulnerabilities and cyberattacks on the Company’s
networks; the Company’s failure to comply with applicable laws and regulations, including, but not limited to, those relating to
privacy and anti-bribery; the Company’s ability to successfully implement its new enterprise resource planning (ERP) system; the
Company’s participation in multiemployer pension plans; the impact of any disruptions resulting from the expiration of collective
bargaining agreements; the impact of natural disasters, which may worsen or increase due to the effects of climate change, and other severe
catastrophic events (such as the ongoing COVID-19 pandemic); the impact of corporate citizenship and environmental, social and governance
matters; the impact of changes in tax regulations and laws, including future income tax payments and utilization of net operating loss
and foreign tax credit carryforwards; volatility of the market price for the Company’s common stock; the Company’s ability
to maintain its stock exchange listing; the effects of anti-takeover provisions in the Company’s organizational documents and Delaware
law; the impact of future offerings or sales of the Company’s common stock on the market price of such stock; expected outcomes
of legal or regulatory proceedings and their anticipated effects on the Company’s results of operations; and any other statements
regarding future growth, future cash needs, future operations, business plans and future financial results.
Other important factors that may cause
actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s
filings with the SEC, including the “Risk Factors” section of the Annual Report on Form 10-K for its 2021 fiscal
year and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2022. Any forward-looking statement speaks
only as of the date of this Current Report on Form 8-K. Except as may be required by applicable law, the Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise, and you are cautioned not to rely upon them unduly.
