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Subsequent Events

3 Months Ended

Mar. 31, 2016

15. SUBSEQUENT EVENTS

Credit Facilities

On April 29, 2016 we and PECI entered into an Amended and Restated Credit Agreements to extend the maturity date of our Canadian and certain US credit facilities with the Bank of Montreal until July 31, 2017. These Amended and Restated Credit Agreements replace the waiver that was set to expire on April 30, 2016. These Amended and Restated Credit Agreements modify our credit facilities as follows:

Canadian Credit Facilities

	·	Facility A is a $7.0 million CAD demand revolving credit facility (reduced from $10.0 million CAD). The interest rate on Facility A is modified to Bank of Montreal’s prime rate plus 0.75% per annum on amounts borrowed in Canadian dollars, or its U.S. base rate plus 0.75% per annum or LIBOR plus 2.25% per annum on amounts borrowed in U.S. dollars.
	·	Facility B – quarterly principal repayments after April 30, 2016 were reduced to $47,128.88 CAD, with a bullet payment of $141,386.56 CAD due on July 31, 2017. The interest rate on Facility B was modified to Bank of Montreal’s prime rate plus 1.25% per annum.
	·	Facility C – quarterly principal repayments after June 30, 2016 were reduced to $36,000 CAD, with a bullet payment of $496,000 CAD due on July 31, 2017. The interest rate on Facility C was modified to Bank of Montreal’s prime rate plus 1.50% per annum on amounts borrowed in Canadian dollars, or its U.S. base rate plus 1.50% per annum or LIBOR plus 2.75% per annum on amounts borrowed in U.S. dollars.
	·	The financial covenant testing is modified so that testing will be performed on the consolidated financial statements of the Company. The financial covenants were changed to require certain minimum working capital ratios, minimum EBITDA levels and effective tangible net worth levels for each fiscal quarter. The Company passed all financial covenant testing for the period ended and as of March 31, 2016. Additionally, defaults relating to the breach of certain financial covenants under the loan letter agreement existing as of December 31, 2015 were waived by the Bank of Montreal, subject to the satisfaction of certain conditions precedent set forth in the Amended and Restated Credit Agreement.

United States Credit Facilities

	·	Facility A is a $14.0 million demand revolving credit facility (increased from $10.0 million). Facility A continues to bear interest, at our option, at the bank’s prime rate plus 1.00% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.25% per annum on Eurodollar loans and shall mature on July 31, 2017.
	·	Facility B is a $5.0 million term loan facility, of which $4,718,750 was outstanding as of April 29, 2016, with principal payments becoming due on a five year amortization schedule, as adjusted for the reduced quarterly principal repayments of 0.625%, or $31,250, from June 30, 2016 to December 31, 2016. The original amortization schedule will continue to apply to all quarterly principal payments made after December 31, 2016, with no change in the final maturity date of December 2, 2019.
	·	A new $100,000 revolving credit facility provided pursuant to a MasterCard is to be used to pay for and temporarily finance day-to-day business expenses of the Company and for no other purpose.
	·	The financial covenant testing is modified so that testing will be performed on the consolidated financial statements of the Company. The financial covenants were changed to require certain minimum working capital ratios, minimum EBITDA levels and effective tangible net worth levels for each fiscal quarter. The Company passed all financial covenant testing for the period ended and as of March 31, 2016. Additionally, defaults relating to the breach of certain financial covenants under the original credit agreement existing as of December 31, 2015 were waived by the Bank of Montreal, subject to the satisfaction of certain conditions precedent set forth in the Amended and Restated Credit Agreement.

With the execution of the Amended and Restated Credit Agreements, portions of the credit facilities have been classified as long-term indebtedness on the Company’s Consolidated Balance Sheet as of March 31, 2016.

Installment Payment Plan with the Internal Revenue Service

On April 20, 2016, two divisions of the Company entered into installment payment agreements with the Internal Revenue Service for the payment of delinquent payroll tax liabilities. These agreements encompass approximately 84% of the amounts owed by the Company for delinquent payroll tax liabilities. With the execution of these installment payment agreements, the Company reclassified $2.8 million of this liability as long-term indebtedness as of March 31, 2016.

The Company continues to pursue installment payment agreements for two other divisions, Jefferson Electric, Inc and Pioneer Critical Power Inc., as well as abatement of all penalties assessed by the Internal Revenue Service on the delinquent payroll taxes.