Note 4 - Liquidity

12 Months Ended

Jan. 31, 2022

Notes to Financial Statements

Liquidation Basis of Accounting [Text Block]

4. Liquidity

The lingering impacts of the global pandemic, emerging supply chain disruptions and recent volatility in oil prices have created significant uncertainty in the global economy which could have a material adverse effect on the Company’s business, financial position, results of operations and liquidity. The time frame for which effects of the global pandemic, supply chain disruptions and volatility in oil prices will continue is uncertain as is the magnitude of any adverse impacts. Management believes that any negative impacts will be temporary, but there can be no assurance of that.

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 pursuant to its at the market (the “ATM”) offering programs for the past several years. As of January 31, 2022, the net book value of remaining lease pool equipment available for sale is approximately $700,000 and the Company has approximately 317,000 shares of Preferred Stock and approximately 13.8 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 a market price 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 funded debt, or other outstanding obligations, outside of normal trade obligations.

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

• The Company has working capital of approximately $18.5 million as of January 31, 2022, including cash of approximately $5.1 million.

• Should revenues be less than projected, the Company believes it is able, and has plans in place, to reduce costs proportionately in order 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 $13.1 million as of January 31, 2022. Production for certain of these orders was in process and included in inventory as of January 31, 2022, thereby reducing the liquidity needed to complete the orders. Subsequent to  January 31, 2022 we received firm orders of approximately $5.7 million and responded to requests for proposals (“RFQ”s) of approximately $4.8 million. Accordingly, the combination of our backlog, subsequent orders and RFQ’s, which management believes will be confirmed and completed in fiscal 2023, currently total approximately $23.6 million.

• Despite difficulties in world energy markets, the Company has been able to generate cash from the sale of lease pool equipment and collection of accounts receivable related to its discontinued operations. Management expects to generate additional liquidity from the sale of lease pool equipment in fiscal 2023.

• The Company has declared the quarterly dividend on its Series A Preferred Stock for the quarter ending April 30, 2022, but such quarterly dividends could be suspended in the future.

• Despite challenging economic conditions in the fiscal 2022, the Company was successful raising approximately $5.2 million in new capital through the sale of Common Stock and Preferred Stock pursuant to the 2^nd ATM offering program. Management expects to be able to raise further capital through the 2^nd ATM offering program should the need arise.

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.