Selling, General and Administrative (SG&A). Selling, general and administrative
expenses decreased in the Fiscal 2013 Period to $1,149,050 from $1,525,988 in
the Fiscal 2013 Period primarily because of reductions in personnel costs. Both
the Fiscal 2013 Period and the Fiscal 2012 Period included an allowance for
doubtful accounts in the amount of $200,000.
Write-off of Goodwill. The Company wrote off goodwill in the Fiscal 2013 Period
Stock Based Compensation. In the Fiscal 2012 Period, we granted stock options to
directors and employees that were valued at $96,815 and granted restricted stock
to employees valued at $24,850. In the 2013 Period, we did not issue stock
options to our directors or employees. The value of options is amortized over
the vesting period of the underlying award. Stock-based compensation is non-cash
and, therefore, has no impact on cash flow or liquidity.
Interest Expense.Interest expense in the Fiscal 2013 Period was $84,032 as
compared to $72,998 for the Fiscal 2012 Period.
Other (Income) Expense, Net. Other, Net in the Fiscal Period 2013 included the
results of litigation, related to an employment matter incidental to our
business, of $20,000, along with $42,398 in legal fees awarded to the
Income Tax Benefit. We recognized a net $194,681 deferred income tax benefit in
Fiscal 2013 and a $130,000 deferred tax benefit Fiscal 2012. The deferred income
tax benefits were recorded based on expectations of that we will utilize a
portion of our existing net operating loss carryforwards with future operating
earnings. The Company and its subsidiaries have net operating loss carryforwards
for federal income tax purposes of about $6.4 million, of which about $120,000
expire in 2017 - 2021, $1.5 million expire in 2022 - 2025, and $4.8 million
expire in 2026 - 2033, and about $3.5 million for state income tax purposes
expiring in 2014 - 2033.
Net Loss. Net loss before dividends for the Fiscal 2013 period was $1,221,153
compared to a net loss before dividends of $1,531,773
in Fiscal 2012.
Dividends Related to 10% Series B Convertible Preferred Stock.
We recorded dividends totaling $147,641
on our Series B Convertible Preferred
Stock in Fiscal 2013 and $149,506
in Fiscal 2012. In lieu of a cash payment, we
have elected, under the terms of the agreement whereby these securities were
sold, to add this amount to the stated value of the Series B Convertible
Preferred Stock. These dividends are non-cash and, therefore, have no impact on
our net worth or cash flow.
Liquidity and Capital Resources
The consolidated financial statements have been prepared assuming we will
continue as a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. We incurred
losses before dividends of $1,221,153
in the years ended June 30,
and 2012, respectively. Our cash flow and liquidity have been severely
impacted by the refusal by Lockheed Martin to pay us for the accounts receivable
due from them totaling nearly $1 million
. Atlantic Stewardship Bank
has converted the prior line of credit to a term loan, and no further borrowings
are available under the agreement (refer to note 6 below). Through the years
ended June 30, 2013
and 2012, the principal source of funds used to finance
Company's operations has been advances from officers, shareholders and
affiliates and accrued costs due to those parties. There is no assurance that
those parties will continue to provide the operating funds. Through Fiscal 2012
and 2013, there were continuing delays in release of funding at the Department
and Department of Energy
on projects where we serve as a prime
contractor and as a subcontractor. The budget constraints and budget uncertainty
at the U.S. government agencies have significantly reduced the issuance of
orders and delayed projects for all participants in our industry. These factors
raise concern about the Company's ability to continue as a going concern.