Based upon current estimates, we may not be in compliance with certain covenants of our Credit Facility in fiscal 2008. If current estimates continue unchanged and we are unable to obtain a waiver or consent of the agent and the lender to our Credit Facility and certain modifications to our existing loan documents, we will be in default with the lender, which will have a material adverse effect on our business.
Based upon our current cash flow estimates, we have alerted our agent and lenders under our Credit Facility that we may be out of compliance in fiscal 2008 with certain financial covenants under our Credit Facility and, similar to other prior concessions obtained from the lenders; seek a temporary waivers and/or amendments to provisions of the Credit Facility. At this time, we expect that we would request the lenders to eliminate or reduce temporarily the required excess availability provision of $2.5 million. In addition, we also may request other modifications. There is no assurance that if we need such a waiver or amendment, our agent and lender will grant it, or if they do grant such a waiver or amendment, such waiver or amendment will be on terms acceptable to us. Failure to obtain a needed waiver or an amendment to our Credit Facility would have a material adverse effect on our business.
We will require additional capital in the future, which may not be available on favorable terms, if at all.
The Company believes that it will require additional capital in fiscal 2008 to meet the requirement in its Credit Facility to have in excess of $10 million in excess availability at all times on and after July 1, 2008. The Company also believes that it will require additional funds to (i) expand its business; (ii) add liquidity in case energy prices materially and unexpectedly increase; and (iii) meet unexpected funding requirements caused by industry volatility and/or uncertainty. To the extent that our existing capital and borrowing capabilities are insufficient to meet these requirements and cover any losses, we will need to raise additional funds through financings or borrowings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. Equity financings could result in dilution to our stockholders, and the securities issued in future financings may have rights, preferences and privileges that are senior to those of our common stock. If our need for capital arises because of significant losses, the occurrence of these losses may make it more difficult for us to raise the necessary capital. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to take advantage of future opportunities, grow our business or respond to competitive pressures or unanticipated requirements.
We may be subject to claims or liabilities in connection with certain regulatory and refund proceedings which could have a material adverse effect on our business and our stock price.
