Note 2 – Liquidity and Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. During the six months ended June 30, 2016 and 2015, the Company reported earnings (loss) from operations of $35 and $(2,511), respectively, and net cash provided by (used in) operating activities of $470 and $(1,029), respectively. Although operations have improved, the Company continues to experience liquidity constraints. In addition, the Company’s Revolver and Term Loan will expire by their terms on September 1, 2016, unless extended. The above factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

In response to lower than expected sales due to a slowdown in market activities experienced during the prior fiscal year, the Company implemented a multi-phase cost-reduction program in 2015, which is expected to reduce annualized expenses, including a temporary reduction in certain executive salaries, a decrease in workforce and a decrease in engineering consulting expenses.

The Company’s primary sources of liquidity are its existing cash balances, cash generated from operations and amounts available under the Santander Financing and the Subordinated Loan Facility (as such terms are defined in Note 6 below). As of June 30, 2016, the Company had approximately $2,228 outstanding under the Revolver (as defined in Note 6 below) and $742 of additional availability for borrowing under the Revolver. As indicated in Note 6 below, the Subordinated Loan Facility provides the Company with up to $750 of additional liquidity, of which $250 remains available for borrowing at June 30, 2016. The Company expects to either obtain an extension on the maturity date or refinance all or part of the Santander indebtedness prior to September 1, 2016. If anticipated operating results are not achieved, and/or sufficient funds are not obtained from the Company’s expected extension or refinancing of the Santander Financing, further reductions in operating expenses may be needed and could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

The Company cannot provide any assurance that it will be able to refinance its current debt obligations. If the Company is unable to refinance, it may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations, which measures may be insufficient to enable the Company to continue as a going concern.